Correlation Between Crown LNG and Equinor ASA

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

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

Diversification Opportunities for Crown LNG and Equinor ASA

-0.36

Correlation Coefficient

Crown LNG  Equinor ASA

Very good diversification

The 3 months correlation between Crown and Equinor is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Crown LNG Holdings and Equinor ASA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinor ASA ADR and Crown LNG 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 Crown LNG Holdings 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 ADR has no effect on the direction of Crown LNG i.e., Crown LNG and Equinor ASA go up and down completely randomly.

Pair Corralation between Crown LNG and Equinor ASA

Assuming the 90 days horizon Crown LNG Holdings is expected to generate 12.66 times more return on investment than Equinor ASA. However, Crown LNG is 12.66 times more volatile than Equinor ASA ADR. It trades about 0.15 of its potential returns per unit of risk. Equinor ASA ADR is currently generating about -0.01 per unit of risk. If you would invest  2.01  in Crown LNG Holdings on September 4, 2024 and sell it today you would earn a total of  1.49  from holding Crown LNG Holdings or generate 74.13% return on investment over 90 days.

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

Crown LNG Holdings  vs.  Equinor ASA ADR

Crown LNG Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Crown LNG Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Crown LNG showed solid returns over the last few months and may actually be approaching a breakup point.

Equinor ASA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equinor ASA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Equinor ASA is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Crown LNG and Equinor ASA

The main advantage of trading using opposite Crown LNG and Equinor ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crown LNG 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 Crown LNG Holdings and Equinor ASA 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.