Correlation Between SmartCraft ASA and Equinor ASA
Can any of the company-specific risk be diversified away by investing in both SmartCraft ASA 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 SmartCraft ASA and Equinor ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SmartCraft ASA and Equinor ASA, you can compare the effects of market volatilities on SmartCraft ASA 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 SmartCraft ASA with a short position of Equinor ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of SmartCraft ASA and Equinor ASA.
Diversification Opportunities for SmartCraft ASA and Equinor ASA
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between SmartCraft and Equinor is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding SmartCraft ASA and Equinor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinor ASA and SmartCraft 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 SmartCraft ASA 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 SmartCraft ASA i.e., SmartCraft ASA and Equinor ASA go up and down completely randomly.
Pair Corralation between SmartCraft ASA and Equinor ASA
Assuming the 90 days trading horizon SmartCraft ASA is expected to generate 1.47 times more return on investment than Equinor ASA. However, SmartCraft ASA is 1.47 times more volatile than Equinor ASA. It trades about 0.06 of its potential returns per unit of risk. Equinor ASA is currently generating about -0.02 per unit of risk. If you would invest 2,050 in SmartCraft ASA on September 4, 2024 and sell it today you would earn a total of 750.00 from holding SmartCraft ASA or generate 36.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SmartCraft ASA vs. Equinor ASA
Performance |
| Timeline |
| SmartCraft ASA |
| Equinor ASA |
SmartCraft ASA and Equinor ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SmartCraft ASA and Equinor ASA
The main advantage of trading using opposite SmartCraft ASA and Equinor ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SmartCraft ASA 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.| SmartCraft ASA vs. Equinor ASA | SmartCraft ASA vs. DnB ASA | SmartCraft ASA vs. Aker BP ASA | SmartCraft ASA vs. Telenor ASA |
| Equinor ASA vs. DnB ASA | Equinor ASA vs. Mowi ASA | Equinor ASA vs. Yara International ASA | Equinor ASA vs. Telenor ASA |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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