Correlation Between Equinor ASA and ALX Resources
Can any of the company-specific risk be diversified away by investing in both Equinor ASA and ALX Resources 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 ALX Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equinor ASA ADR and ALX Resources Corp, you can compare the effects of market volatilities on Equinor ASA and ALX Resources 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 ALX Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equinor ASA and ALX Resources.
Diversification Opportunities for Equinor ASA and ALX Resources
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Equinor and ALX is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Equinor ASA ADR and ALX Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALX Resources Corp 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 ADR are associated (or correlated) with ALX Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALX Resources Corp has no effect on the direction of Equinor ASA i.e., Equinor ASA and ALX Resources go up and down completely randomly.
Pair Corralation between Equinor ASA and ALX Resources
Given the investment horizon of 90 days Equinor ASA ADR is expected to generate 0.27 times more return on investment than ALX Resources. However, Equinor ASA ADR is 3.65 times less risky than ALX Resources. It trades about 0.14 of its potential returns per unit of risk. ALX Resources Corp is currently generating about -0.02 per unit of risk. If you would invest 2,291 in Equinor ASA ADR on September 1, 2024 and sell it today you would earn a total of 127.00 from holding Equinor ASA ADR or generate 5.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Equinor ASA ADR vs. ALX Resources Corp
Performance |
| Timeline |
| Equinor ASA ADR |
| ALX Resources Corp |
Equinor ASA and ALX Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equinor ASA and ALX Resources
The main advantage of trading using opposite Equinor ASA and ALX Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equinor ASA position performs unexpectedly, ALX Resources 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 ALX Resources will offset losses from the drop in ALX Resources' long position.| Equinor ASA vs. Shell PLC ADR | Equinor ASA vs. BP PLC ADR | Equinor ASA vs. Eni SpA ADR | Equinor ASA vs. Galp Energa |
| ALX Resources vs. Petroleo Brasileiro Petrobras | ALX Resources vs. Equinor ASA ADR | ALX Resources vs. Eni SpA ADR | ALX Resources vs. YPF Sociedad Anonima |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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