Correlation Between Equinor ASA and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Equinor ASA and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on Equinor ASA and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equinor ASA and Dow Jones.
Diversification Opportunities for Equinor ASA and Dow Jones
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Equinor and Dow is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Equinor ASA ADR and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Equinor ASA i.e., Equinor ASA and Dow Jones go up and down completely randomly.
Pair Corralation between Equinor ASA and Dow Jones
Given the investment horizon of 90 days Equinor ASA ADR is expected to generate 2.29 times more return on investment than Dow Jones. However, Equinor ASA is 2.29 times more volatile than Dow Jones Industrial. It trades about 0.2 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.17 per unit of risk. If you would invest 2,272 in Equinor ASA ADR on October 24, 2024 and sell it today you would earn a total of 154.50 from holding Equinor ASA ADR or generate 6.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equinor ASA ADR vs. Dow Jones Industrial
Performance |
| Timeline |
Equinor ASA and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Equinor ASA ADR
Pair trading matchups for Equinor ASA
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Equinor ASA and Dow Jones
The main advantage of trading using opposite Equinor ASA and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equinor ASA position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' 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 |
| Dow Jones vs. Transocean | Dow Jones vs. Noble plc | Dow Jones vs. Evolution Gaming Group | Dow Jones vs. Addus HomeCare |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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