Correlation Between KIN and Equinor ASA
Can any of the company-specific risk be diversified away by investing in both KIN 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 KIN and Equinor ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KIN and Equinor ASA ADR, you can compare the effects of market volatilities on KIN 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 KIN with a short position of Equinor ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of KIN and Equinor ASA.
Diversification Opportunities for KIN and Equinor ASA
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between KIN and Equinor is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding KIN and Equinor ASA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinor ASA ADR and KIN 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 KIN 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 ADR has no effect on the direction of KIN i.e., KIN and Equinor ASA go up and down completely randomly.
Pair Corralation between KIN and Equinor ASA
Assuming the 90 days trading horizon KIN is expected to generate 5.54 times more return on investment than Equinor ASA. However, KIN is 5.54 times more volatile than Equinor ASA ADR. It trades about 0.05 of its potential returns per unit of risk. Equinor ASA ADR is currently generating about -0.02 per unit of risk. If you would invest 0.00 in KIN on September 3, 2024 and sell it today you would earn a total of 0.00 from holding KIN or generate 20.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 60.4% |
| Values | Daily Returns |
KIN vs. Equinor ASA ADR
Performance |
| Timeline |
| KIN |
| Equinor ASA ADR |
KIN and Equinor ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KIN and Equinor ASA
The main advantage of trading using opposite KIN and Equinor ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KIN 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 KIN and Equinor ASA ADR 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.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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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