Correlation Between Equinor ASA and Aker BP
Can any of the company-specific risk be diversified away by investing in both Equinor ASA and Aker BP at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Equinor ASA and Aker BP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equinor ASA and Aker BP ASA, you can compare the effects of market volatilities on Equinor ASA and Aker BP and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Equinor ASA with a short position of Aker BP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equinor ASA and Aker BP.
Diversification Opportunities for Equinor ASA and Aker BP
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Equinor and Aker is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Equinor ASA and Aker BP ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aker BP ASA and Equinor ASA is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Equinor ASA are associated (or correlated) with Aker BP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aker BP ASA has no effect on the direction of Equinor ASA i.e., Equinor ASA and Aker BP go up and down completely randomly.
Pair Corralation between Equinor ASA and Aker BP
Assuming the 90 days trading horizon Equinor ASA is expected to generate 0.96 times more return on investment than Aker BP. However, Equinor ASA is 1.04 times less risky than Aker BP. It trades about 0.01 of its potential returns per unit of risk. Aker BP ASA is currently generating about 0.0 per unit of risk. If you would invest 27,415 in Equinor ASA on November 2, 2024 and sell it today you would lose (265.00) from holding Equinor ASA or give up 0.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equinor ASA vs. Aker BP ASA
Performance |
| Timeline |
| Equinor ASA |
| Aker BP ASA |
Equinor ASA and Aker BP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equinor ASA and Aker BP
The main advantage of trading using opposite Equinor ASA and Aker BP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equinor ASA position performs unexpectedly, Aker BP can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Aker BP will offset losses from the drop in Aker BP's long position.| Equinor ASA vs. DnB ASA | Equinor ASA vs. Mowi ASA | Equinor ASA vs. Yara International ASA | Equinor ASA vs. Telenor ASA |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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