Correlation Between Aker BP and EQT

Can any of the company-specific risk be diversified away by investing in both Aker BP and EQT 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 Aker BP and EQT into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aker BP ASA and EQT Corporation, you can compare the effects of market volatilities on Aker BP and EQT 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 Aker BP with a short position of EQT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aker BP and EQT.

Diversification Opportunities for Aker BP and EQT

0.04

Correlation Coefficient

Aker BP  EQT

Significant diversification

The 3 months correlation between Aker and EQT is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Aker BP ASA and EQT Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EQT Corporation and Aker BP 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 Aker BP ASA are associated (or correlated) with EQT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EQT Corporation has no effect on the direction of Aker BP i.e., Aker BP and EQT go up and down completely randomly.

Pair Corralation between Aker BP and EQT

Assuming the 90 days horizon Aker BP ASA is expected to under-perform the EQT. In addition to that, Aker BP is 3.04 times more volatile than EQT Corporation. It trades about -0.02 of its total potential returns per unit of risk. EQT Corporation is currently generating about 0.08 per unit of volatility. If you would invest  4,428  in EQT Corporation on September 17, 2024 and sell it today you would earn a total of  131.00  from holding EQT Corporation or generate 2.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Aker BP ASA  vs.  EQT Corp.

Aker BP ASA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aker BP ASA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental drivers, Aker BP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

EQT Corporation

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in EQT Corporation are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, EQT unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aker BP and EQT

The main advantage of trading using opposite Aker BP and EQT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aker BP position performs unexpectedly, EQT 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 EQT will offset losses from the drop in EQT's long position.

The idea behind Aker BP ASA and EQT Corporation 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.

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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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.