Correlation Between Equinor ASA and SmartCraft ASA
Can any of the company-specific risk be diversified away by investing in both Equinor ASA and SmartCraft 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 SmartCraft 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 SmartCraft ASA, you can compare the effects of market volatilities on Equinor ASA and SmartCraft 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 SmartCraft ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equinor ASA and SmartCraft ASA.
Diversification Opportunities for Equinor ASA and SmartCraft ASA
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Equinor and SmartCraft is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Equinor ASA and SmartCraft ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SmartCraft 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 SmartCraft ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SmartCraft ASA has no effect on the direction of Equinor ASA i.e., Equinor ASA and SmartCraft ASA go up and down completely randomly.
Pair Corralation between Equinor ASA and SmartCraft ASA
Assuming the 90 days trading horizon Equinor ASA is expected to generate 0.59 times more return on investment than SmartCraft ASA. However, Equinor ASA is 1.68 times less risky than SmartCraft ASA. It trades about 0.15 of its potential returns per unit of risk. SmartCraft ASA is currently generating about -0.11 per unit of risk. If you would invest 25,408 in Equinor ASA on September 5, 2024 and sell it today you would earn a total of 1,717 from holding Equinor ASA or generate 6.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equinor ASA vs. SmartCraft ASA
Performance |
| Timeline |
| Equinor ASA |
| SmartCraft ASA |
Equinor ASA and SmartCraft ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equinor ASA and SmartCraft ASA
The main advantage of trading using opposite Equinor ASA and SmartCraft ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equinor ASA position performs unexpectedly, SmartCraft 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 SmartCraft ASA will offset losses from the drop in SmartCraft ASA's long position.The idea behind Equinor ASA and SmartCraft 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.| SmartCraft ASA vs. Equinor ASA | SmartCraft ASA vs. DnB ASA | SmartCraft ASA vs. Aker BP ASA | SmartCraft 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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