Correlation Between Equinor ASA and Goodtech
Can any of the company-specific risk be diversified away by investing in both Equinor ASA and Goodtech 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 Goodtech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equinor ASA and Goodtech, you can compare the effects of market volatilities on Equinor ASA and Goodtech 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 Goodtech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equinor ASA and Goodtech.
Diversification Opportunities for Equinor ASA and Goodtech
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Equinor and Goodtech is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Equinor ASA and Goodtech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodtech 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 Goodtech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goodtech has no effect on the direction of Equinor ASA i.e., Equinor ASA and Goodtech go up and down completely randomly.
Pair Corralation between Equinor ASA and Goodtech
Assuming the 90 days trading horizon Equinor ASA is expected to under-perform the Goodtech. But the stock apears to be less risky and, when comparing its historical volatility, Equinor ASA is 1.41 times less risky than Goodtech. The stock trades about -0.02 of its potential returns per unit of risk. The Goodtech is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 994.00 in Goodtech on August 29, 2024 and sell it today you would lose (76.00) from holding Goodtech or give up 7.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equinor ASA vs. Goodtech
Performance |
| Timeline |
| Equinor ASA |
| Goodtech |
Equinor ASA and Goodtech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equinor ASA and Goodtech
The main advantage of trading using opposite Equinor ASA and Goodtech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equinor ASA position performs unexpectedly, Goodtech 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 Goodtech will offset losses from the drop in Goodtech's long position.| Equinor ASA vs. DnB ASA | Equinor ASA vs. Mowi ASA | Equinor ASA vs. Yara International ASA | Equinor ASA vs. Telenor ASA |
| Goodtech vs. Eidesvik Offshore ASA | Goodtech vs. Kitron ASA | Goodtech vs. Havila Shipping ASA | Goodtech vs. Elkem 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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