Correlation Between Equinor ASA and Prospera Energy
Can any of the company-specific risk be diversified away by investing in both Equinor ASA and Prospera 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 Prospera 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 Prospera Energy, you can compare the effects of market volatilities on Equinor ASA and Prospera 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 Prospera Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equinor ASA and Prospera Energy.
Diversification Opportunities for Equinor ASA and Prospera Energy
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Equinor and Prospera is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Equinor ASA ADR and Prospera Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prospera 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 Prospera Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prospera Energy has no effect on the direction of Equinor ASA i.e., Equinor ASA and Prospera Energy go up and down completely randomly.
Pair Corralation between Equinor ASA and Prospera Energy
Given the investment horizon of 90 days Equinor ASA ADR is expected to generate 0.31 times more return on investment than Prospera Energy. However, Equinor ASA ADR is 3.18 times less risky than Prospera Energy. It trades about -0.01 of its potential returns per unit of risk. Prospera Energy is currently generating about -0.03 per unit of risk. If you would invest 2,408 in Equinor ASA ADR on August 29, 2024 and sell it today you would lose (18.00) from holding Equinor ASA ADR or give up 0.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equinor ASA ADR vs. Prospera Energy
Performance |
| Timeline |
| Equinor ASA ADR |
| Prospera Energy |
Equinor ASA and Prospera Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equinor ASA and Prospera Energy
The main advantage of trading using opposite Equinor ASA and Prospera Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equinor ASA position performs unexpectedly, Prospera 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 Prospera Energy will offset losses from the drop in Prospera Energy's long position.The idea behind Equinor ASA ADR and Prospera Energy pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Prospera Energy vs. Petroleo Brasileiro Petrobras | Prospera Energy vs. Equinor ASA ADR | Prospera Energy vs. Eni SpA ADR | Prospera 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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