Correlation Between Equinor ASA and Blue Water
Can any of the company-specific risk be diversified away by investing in both Equinor ASA and Blue Water 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 Blue Water 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 Blue Water Petroleum, you can compare the effects of market volatilities on Equinor ASA and Blue Water 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 Blue Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equinor ASA and Blue Water.
Diversification Opportunities for Equinor ASA and Blue Water
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Equinor and Blue is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Equinor ASA ADR and Blue Water Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Water Petroleum 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 Blue Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Water Petroleum has no effect on the direction of Equinor ASA i.e., Equinor ASA and Blue Water go up and down completely randomly.
Pair Corralation between Equinor ASA and Blue Water
Given the investment horizon of 90 days Equinor ASA ADR is expected to under-perform the Blue Water. But the stock apears to be less risky and, when comparing its historical volatility, Equinor ASA ADR is 7.1 times less risky than Blue Water. The stock trades about -0.03 of its potential returns per unit of risk. The Blue Water Petroleum is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 125.00 in Blue Water Petroleum on August 25, 2024 and sell it today you would lose (102.00) from holding Blue Water Petroleum or give up 81.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equinor ASA ADR vs. Blue Water Petroleum
Performance |
| Timeline |
| Equinor ASA ADR |
| Blue Water Petroleum |
Equinor ASA and Blue Water Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equinor ASA and Blue Water
The main advantage of trading using opposite Equinor ASA and Blue Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equinor ASA position performs unexpectedly, Blue Water 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 Blue Water will offset losses from the drop in Blue Water's long position.| Equinor ASA vs. Shell PLC ADR | Equinor ASA vs. Suncor Energy | Equinor ASA vs. Cenovus Energy | Equinor ASA vs. Petrleo Brasileiro SA |
| Blue Water vs. Petroleo Brasileiro Petrobras | Blue Water vs. Equinor ASA ADR | Blue Water vs. Eni SpA ADR | Blue Water 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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