Correlation Between Equinor ASA and STEP Energy
Can any of the company-specific risk be diversified away by investing in both Equinor ASA and STEP 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 STEP 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 STEP Energy Services, you can compare the effects of market volatilities on Equinor ASA and STEP 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 STEP Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equinor ASA and STEP Energy.
Diversification Opportunities for Equinor ASA and STEP Energy
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Equinor and STEP is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Equinor ASA ADR and STEP Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STEP Energy Services 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 STEP Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STEP Energy Services has no effect on the direction of Equinor ASA i.e., Equinor ASA and STEP Energy go up and down completely randomly.
Pair Corralation between Equinor ASA and STEP Energy
Given the investment horizon of 90 days Equinor ASA ADR is expected to under-perform the STEP Energy. But the stock apears to be less risky and, when comparing its historical volatility, Equinor ASA ADR is 2.17 times less risky than STEP Energy. The stock trades about -0.03 of its potential returns per unit of risk. The STEP Energy Services is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 306.00 in STEP Energy Services on September 3, 2024 and sell it today you would earn a total of 59.00 from holding STEP Energy Services or generate 19.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.56% |
| Values | Daily Returns |
Equinor ASA ADR vs. STEP Energy Services
Performance |
| Timeline |
| Equinor ASA ADR |
| STEP Energy Services |
Equinor ASA and STEP Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equinor ASA and STEP Energy
The main advantage of trading using opposite Equinor ASA and STEP Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equinor ASA position performs unexpectedly, STEP 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 STEP Energy will offset losses from the drop in STEP Energy's long position.| Equinor ASA vs. Petroleo Brasileiro Petrobras | Equinor ASA vs. SPACE | Equinor ASA vs. Ampleforth | Equinor ASA vs. ionet |
| STEP Energy vs. Total Energy Services | STEP Energy vs. Trican Well Service | STEP Energy vs. Koil Energy Solutions | STEP Energy vs. TerraVest Industries |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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