Correlation Between Equinor ASA and Nel ASA
Can any of the company-specific risk be diversified away by investing in both Equinor ASA and Nel ASA 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 Nel ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equinor ASA and Nel ASA, you can compare the effects of market volatilities on Equinor ASA and Nel ASA 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 Nel ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equinor ASA and Nel ASA.
Diversification Opportunities for Equinor ASA and Nel ASA
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Equinor and Nel is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Equinor ASA and Nel ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nel 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 Nel ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nel ASA has no effect on the direction of Equinor ASA i.e., Equinor ASA and Nel ASA go up and down completely randomly.
Pair Corralation between Equinor ASA and Nel ASA
Assuming the 90 days trading horizon Equinor ASA is expected to generate 0.51 times more return on investment than Nel ASA. However, Equinor ASA is 1.98 times less risky than Nel ASA. It trades about 0.09 of its potential returns per unit of risk. Nel ASA is currently generating about -0.32 per unit of risk. If you would invest 25,774 in Equinor ASA on September 1, 2024 and sell it today you would earn a total of 946.00 from holding Equinor ASA or generate 3.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Equinor ASA vs. Nel ASA
Performance |
| Timeline |
| Equinor ASA |
| Nel ASA |
Equinor ASA and Nel ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equinor ASA and Nel ASA
The main advantage of trading using opposite Equinor ASA and Nel ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equinor ASA position performs unexpectedly, Nel ASA 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 Nel ASA will offset losses from the drop in Nel ASA'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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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