Correlation Between Equinor ASA and NuVista Energy
Can any of the company-specific risk be diversified away by investing in both Equinor ASA and NuVista 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 NuVista 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 NuVista Energy, you can compare the effects of market volatilities on Equinor ASA and NuVista 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 NuVista Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equinor ASA and NuVista Energy.
Diversification Opportunities for Equinor ASA and NuVista Energy
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Equinor and NuVista is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Equinor ASA ADR and NuVista Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NuVista 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 NuVista Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NuVista Energy has no effect on the direction of Equinor ASA i.e., Equinor ASA and NuVista Energy go up and down completely randomly.
Pair Corralation between Equinor ASA and NuVista Energy
Given the investment horizon of 90 days Equinor ASA ADR is expected to under-perform the NuVista Energy. But the stock apears to be less risky and, when comparing its historical volatility, Equinor ASA ADR is 1.26 times less risky than NuVista Energy. The stock trades about -0.03 of its potential returns per unit of risk. The NuVista Energy is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 857.00 in NuVista Energy on August 29, 2024 and sell it today you would earn a total of 120.00 from holding NuVista Energy or generate 14.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Equinor ASA ADR vs. NuVista Energy
Performance |
| Timeline |
| Equinor ASA ADR |
| NuVista Energy |
Equinor ASA and NuVista Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equinor ASA and NuVista Energy
The main advantage of trading using opposite Equinor ASA and NuVista Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equinor ASA position performs unexpectedly, NuVista 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 NuVista Energy will offset losses from the drop in NuVista Energy's long position.| Equinor ASA vs. Chevron Corp | Equinor ASA vs. Merck Company | Equinor ASA vs. Pharvaris BV | Equinor ASA vs. Brinker International |
| NuVista Energy vs. Yamaha Motor Co | NuVista Energy vs. Nitto Denko Corp | NuVista Energy vs. Farmers Merchants Bancorp | NuVista Energy vs. Furukawa Electric Co |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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