Correlation Between GM and Equinor ASA
Can any of the company-specific risk be diversified away by investing in both GM and Equinor ASA 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 GM and Equinor ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Equinor ASA, you can compare the effects of market volatilities on GM and Equinor ASA 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 GM with a short position of Equinor ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Equinor ASA.
Diversification Opportunities for GM and Equinor ASA
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Equinor is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Equinor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinor ASA and GM 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 General Motors are associated (or correlated) with Equinor ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinor ASA has no effect on the direction of GM i.e., GM and Equinor ASA go up and down completely randomly.
Pair Corralation between GM and Equinor ASA
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Equinor ASA. In addition to that, GM is 1.47 times more volatile than Equinor ASA. It trades about -0.16 of its total potential returns per unit of risk. Equinor ASA is currently generating about -0.1 per unit of volatility. If you would invest 2,266 in Equinor ASA on September 19, 2024 and sell it today you would lose (100.00) from holding Equinor ASA or give up 4.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 91.3% |
| Values | Daily Returns |
General Motors vs. Equinor ASA
Performance |
| Timeline |
| General Motors |
| Equinor ASA |
GM and Equinor ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Equinor ASA
The main advantage of trading using opposite GM and Equinor ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Equinor ASA 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 Equinor ASA will offset losses from the drop in Equinor ASA's long position.The idea behind General Motors and Equinor ASA 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.| Equinor ASA vs. NXP Semiconductors NV | Equinor ASA vs. AGRICULTBK HADR25 YC | Equinor ASA vs. Granite Construction | Equinor ASA vs. Australian Agricultural |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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