Correlation Between Repsol SA and Equinor ASA

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

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

Diversification Opportunities for Repsol SA and Equinor ASA

-0.01

Correlation Coefficient

Repsol SA  Equinor ASA

Good diversification

The 3 months correlation between Repsol and Equinor is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Repsol SA and Equinor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinor ASA and Repsol SA 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 Repsol SA 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 Repsol SA i.e., Repsol SA and Equinor ASA go up and down completely randomly.

Pair Corralation between Repsol SA and Equinor ASA

If you would invest  1,583  in Repsol SA on September 16, 2024 and sell it today you would earn a total of  0.00  from holding Repsol SA or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.54%
Values	Daily Returns

Repsol SA  vs.  Equinor ASA

Repsol SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Repsol SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Repsol SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 nearly stable technical indicators, Equinor ASA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Repsol SA and Equinor ASA

The main advantage of trading using opposite Repsol SA and Equinor ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Repsol SA 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 Repsol SA 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.

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.