Correlation Between Equinor ASA and Cardinal Energy
Can any of the company-specific risk be diversified away by investing in both Equinor ASA and Cardinal Energy 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 Cardinal Energy 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 Cardinal Energy, you can compare the effects of market volatilities on Equinor ASA and Cardinal Energy 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 Cardinal Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equinor ASA and Cardinal Energy.
Diversification Opportunities for Equinor ASA and Cardinal Energy
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Equinor and Cardinal is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Equinor ASA ADR and Cardinal Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Energy 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 Cardinal Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardinal Energy has no effect on the direction of Equinor ASA i.e., Equinor ASA and Cardinal Energy go up and down completely randomly.
Pair Corralation between Equinor ASA and Cardinal Energy
Given the investment horizon of 90 days Equinor ASA ADR is expected to generate 1.12 times more return on investment than Cardinal Energy. However, Equinor ASA is 1.12 times more volatile than Cardinal Energy. It trades about 0.03 of its potential returns per unit of risk. Cardinal Energy is currently generating about 0.02 per unit of risk. If you would invest 2,309 in Equinor ASA ADR on August 25, 2024 and sell it today you would earn a total of 158.00 from holding Equinor ASA ADR or generate 6.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equinor ASA ADR vs. Cardinal Energy
Performance |
| Timeline |
| Equinor ASA ADR |
| Cardinal Energy |
Equinor ASA and Cardinal Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equinor ASA and Cardinal Energy
The main advantage of trading using opposite Equinor ASA and Cardinal Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equinor ASA position performs unexpectedly, Cardinal Energy 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 Cardinal Energy will offset losses from the drop in Cardinal Energy'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 |
| Cardinal Energy vs. Petroleo Brasileiro Petrobras | Cardinal Energy vs. Equinor ASA ADR | Cardinal Energy vs. Eni SpA ADR | Cardinal Energy 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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