Correlation Between Equinor ASA and Eneos Holdings

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

By analyzing existing cross correlation between Equinor ASA and Eneos Holdings ADR, you can compare the effects of market volatilities on Equinor ASA and Eneos Holdings 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 Eneos Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equinor ASA and Eneos Holdings.

Diversification Opportunities for Equinor ASA and Eneos Holdings

0.64

Correlation Coefficient

Equinor ASA  Eneos Holdings

Poor diversification

The 3 months correlation between Equinor and Eneos is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Equinor ASA and Eneos Holdings ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eneos Holdings ADR 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 Eneos Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eneos Holdings ADR has no effect on the direction of Equinor ASA i.e., Equinor ASA and Eneos Holdings go up and down completely randomly.

Pair Corralation between Equinor ASA and Eneos Holdings

Assuming the 90 days horizon Equinor ASA is expected to under-perform the Eneos Holdings. But the pink sheet apears to be less risky and, when comparing its historical volatility, Equinor ASA is 2.29 times less risky than Eneos Holdings. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Eneos Holdings ADR is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,047  in Eneos Holdings ADR on September 16, 2024 and sell it today you would lose (59.00) from holding Eneos Holdings ADR or give up 5.64% of portfolio value over 90 days.

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

Equinor ASA  vs.  Eneos Holdings ADR

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.

Eneos Holdings ADR

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Equinor ASA and Eneos Holdings

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

The idea behind Equinor ASA and Eneos Holdings 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.

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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.