Correlation Between Empire Petroleum and Equinor ASA

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

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

Diversification Opportunities for Empire Petroleum and Equinor ASA

0.16

Correlation Coefficient

Empire Petroleum  Equinor ASA

Average diversification

The 3 months correlation between Empire and Equinor is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Empire Petroleum Corp 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 Empire Petroleum 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 Empire Petroleum Corp 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 Empire Petroleum i.e., Empire Petroleum and Equinor ASA go up and down completely randomly.

Pair Corralation between Empire Petroleum and Equinor ASA

Allowing for the 90-day total investment horizon Empire Petroleum Corp is expected to generate 2.17 times more return on investment than Equinor ASA. However, Empire Petroleum is 2.17 times more volatile than Equinor ASA ADR. It trades about 0.04 of its potential returns per unit of risk. Equinor ASA ADR is currently generating about -0.03 per unit of risk. If you would invest  633.00  in Empire Petroleum Corp on November 28, 2024 and sell it today you would earn a total of  24.00  from holding Empire Petroleum Corp or generate 3.79% return on investment over 90 days.

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

Empire Petroleum Corp  vs.  Equinor ASA ADR

Empire Petroleum Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Empire Petroleum Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Empire Petroleum may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Equinor ASA ADR

Risk-Adjusted Performance

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 Empire Petroleum and Equinor ASA

The main advantage of trading using opposite Empire Petroleum and Equinor ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire Petroleum 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 Empire Petroleum Corp 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.