Correlation Between Equinor ASA and Shelf Drilling
Can any of the company-specific risk be diversified away by investing in both Equinor ASA and Shelf Drilling 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 Shelf Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equinor ASA and Shelf Drilling, you can compare the effects of market volatilities on Equinor ASA and Shelf Drilling 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 Shelf Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equinor ASA and Shelf Drilling.
Diversification Opportunities for Equinor ASA and Shelf Drilling
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Equinor and Shelf is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Equinor ASA and Shelf Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shelf Drilling 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 Shelf Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shelf Drilling has no effect on the direction of Equinor ASA i.e., Equinor ASA and Shelf Drilling go up and down completely randomly.
Pair Corralation between Equinor ASA and Shelf Drilling
Assuming the 90 days trading horizon Equinor ASA is expected to generate 0.48 times more return on investment than Shelf Drilling. However, Equinor ASA is 2.07 times less risky than Shelf Drilling. It trades about 0.04 of its potential returns per unit of risk. Shelf Drilling is currently generating about -0.41 per unit of risk. If you would invest 26,813 in Equinor ASA on August 25, 2024 and sell it today you would earn a total of 437.00 from holding Equinor ASA or generate 1.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equinor ASA vs. Shelf Drilling
Performance |
| Timeline |
| Equinor ASA |
| Shelf Drilling |
Equinor ASA and Shelf Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equinor ASA and Shelf Drilling
The main advantage of trading using opposite Equinor ASA and Shelf Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equinor ASA position performs unexpectedly, Shelf Drilling 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 Shelf Drilling will offset losses from the drop in Shelf Drilling's long position.| Equinor ASA vs. DnB ASA | Equinor ASA vs. Mowi ASA | Equinor ASA vs. Yara International ASA | Equinor ASA vs. Telenor ASA |
| Shelf Drilling vs. BW Offshore | Shelf Drilling vs. Elkem ASA | Shelf Drilling vs. Solstad Offsho | Shelf Drilling vs. Arcticzymes Technologies 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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