Correlation Between Equinor ASA and Morrow Bank

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Can any of the company-specific risk be diversified away by investing in both Equinor ASA and Morrow Bank 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 Morrow Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equinor ASA and Morrow Bank ASA, you can compare the effects of market volatilities on Equinor ASA and Morrow Bank 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 Morrow Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equinor ASA and Morrow Bank.

Diversification Opportunities for Equinor ASA and Morrow Bank

-0.13
  Correlation Coefficient

Good diversification

The 3 months correlation between Equinor and Morrow is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Equinor ASA and Morrow Bank ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morrow Bank 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 Morrow Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morrow Bank ASA has no effect on the direction of Equinor ASA i.e., Equinor ASA and Morrow Bank go up and down completely randomly.

Pair Corralation between Equinor ASA and Morrow Bank

Assuming the 90 days trading horizon Equinor ASA is expected to generate 36.83 times less return on investment than Morrow Bank. But when comparing it to its historical volatility, Equinor ASA is 1.12 times less risky than Morrow Bank. It trades about 0.02 of its potential returns per unit of risk. Morrow Bank ASA is currently generating about 0.59 of returns per unit of risk over similar time horizon. If you would invest  638.00  in Morrow Bank ASA on August 29, 2024 and sell it today you would earn a total of  222.00  from holding Morrow Bank ASA or generate 34.8% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Equinor ASA  vs.  Morrow Bank ASA

 Performance 
       Timeline  
Equinor ASA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Equinor ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Equinor ASA is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.
Morrow Bank ASA 

Risk-Adjusted Performance

21 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Morrow Bank ASA are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, Morrow Bank disclosed solid returns over the last few months and may actually be approaching a breakup point.

Equinor ASA and Morrow Bank Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Equinor ASA and Morrow Bank

The main advantage of trading using opposite Equinor ASA and Morrow Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equinor ASA position performs unexpectedly, Morrow Bank 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 Morrow Bank will offset losses from the drop in Morrow Bank's long position.
The idea behind Equinor ASA and Morrow Bank ASA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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