Correlation Between Equinor ASA and DNB NOR

Can any of the company-specific risk be diversified away by investing in both Equinor ASA and DNB NOR 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 DNB NOR into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Equinor ASA and DNB NOR KAPFORV, you can compare the effects of market volatilities on Equinor ASA and DNB NOR 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 DNB NOR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equinor ASA and DNB NOR.

Diversification Opportunities for Equinor ASA and DNB NOR

0.41

Correlation Coefficient

Equinor ASA  DNB NOR

Very weak diversification

The 3 months correlation between Equinor and DNB is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Equinor ASA and DNB NOR KAPFORV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DNB NOR KAPFORV 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 are associated (or correlated) with DNB NOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DNB NOR KAPFORV has no effect on the direction of Equinor ASA i.e., Equinor ASA and DNB NOR go up and down completely randomly.

Pair Corralation between Equinor ASA and DNB NOR

Assuming the 90 days trading horizon Equinor ASA is expected to under-perform the DNB NOR. In addition to that, Equinor ASA is 11.93 times more volatile than DNB NOR KAPFORV. It trades about -0.01 of its total potential returns per unit of risk. DNB NOR KAPFORV is currently generating about -0.01 per unit of volatility. If you would invest  109,438  in DNB NOR KAPFORV on September 18, 2024 and sell it today you would lose (75.00) from holding DNB NOR KAPFORV or give up 0.07% of portfolio value over 90 days.

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

Equinor ASA  vs.  DNB NOR KAPFORV

Equinor ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equinor ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Equinor ASA is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

DNB NOR KAPFORV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DNB NOR KAPFORV has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, DNB NOR is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Equinor ASA and DNB NOR

The main advantage of trading using opposite Equinor ASA and DNB NOR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equinor ASA position performs unexpectedly, DNB NOR 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 DNB NOR will offset losses from the drop in DNB NOR's long position.

The idea behind Equinor ASA and DNB NOR KAPFORV 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.