Correlation Between Aker ASA and Equinor ASA

Can any of the company-specific risk be diversified away by investing in both Aker 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 Aker 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 Aker ASA and Equinor ASA, you can compare the effects of market volatilities on Aker 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 Aker ASA with a short position of Equinor ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aker ASA and Equinor ASA.

Diversification Opportunities for Aker ASA and Equinor ASA

-0.06

Correlation Coefficient

Aker ASA  Equinor ASA

Good diversification

The 3 months correlation between Aker and Equinor is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Aker ASA and Equinor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinor ASA and Aker 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 Aker 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 Aker ASA i.e., Aker ASA and Equinor ASA go up and down completely randomly.

Pair Corralation between Aker ASA and Equinor ASA

Assuming the 90 days trading horizon Aker ASA is expected to generate 0.74 times more return on investment than Equinor ASA. However, Aker ASA is 1.36 times less risky than Equinor ASA. It trades about 0.15 of its potential returns per unit of risk. Equinor ASA is currently generating about 0.05 per unit of risk. If you would invest  54,900  in Aker ASA on December 30, 2024 and sell it today you would earn a total of  7,600  from holding Aker ASA or generate 13.84% return on investment over 90 days.

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

Aker ASA  vs.  Equinor ASA

Aker ASA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aker ASA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Aker ASA disclosed solid returns over the last few months and may actually be approaching a breakup point.

Equinor ASA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Equinor ASA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Aker ASA and Equinor ASA

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

The idea behind Aker ASA 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..