Correlation Between Equinor ASA and Freehold Royalties
Can any of the company-specific risk be diversified away by investing in both Equinor ASA and Freehold Royalties 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 Freehold Royalties 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 Freehold Royalties, you can compare the effects of market volatilities on Equinor ASA and Freehold Royalties 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 Freehold Royalties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equinor ASA and Freehold Royalties.
Diversification Opportunities for Equinor ASA and Freehold Royalties
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Equinor and Freehold is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Equinor ASA ADR and Freehold Royalties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freehold Royalties 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 Freehold Royalties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freehold Royalties has no effect on the direction of Equinor ASA i.e., Equinor ASA and Freehold Royalties go up and down completely randomly.
Pair Corralation between Equinor ASA and Freehold Royalties
Given the investment horizon of 90 days Equinor ASA ADR is expected to under-perform the Freehold Royalties. In addition to that, Equinor ASA is 2.54 times more volatile than Freehold Royalties. It trades about -0.01 of its total potential returns per unit of risk. Freehold Royalties is currently generating about 0.19 per unit of volatility. If you would invest 999.00 in Freehold Royalties on August 26, 2024 and sell it today you would earn a total of 36.00 from holding Freehold Royalties or generate 3.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equinor ASA ADR vs. Freehold Royalties
Performance |
| Timeline |
| Equinor ASA ADR |
| Freehold Royalties |
Equinor ASA and Freehold Royalties Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equinor ASA and Freehold Royalties
The main advantage of trading using opposite Equinor ASA and Freehold Royalties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equinor ASA position performs unexpectedly, Freehold Royalties 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 Freehold Royalties will offset losses from the drop in Freehold Royalties' 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 |
| Freehold Royalties vs. Petroleo Brasileiro Petrobras | Freehold Royalties vs. Equinor ASA ADR | Freehold Royalties vs. Eni SpA ADR | Freehold Royalties 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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