Correlation Between Equinor ASA and Bergenbio ASA

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

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

Diversification Opportunities for Equinor ASA and Bergenbio ASA

0.57

Correlation Coefficient

Equinor ASA  Bergenbio ASA

Very weak diversification

The 3 months correlation between Equinor and Bergenbio is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Equinor ASA and Bergenbio ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bergenbio ASA 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 Bergenbio ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bergenbio ASA has no effect on the direction of Equinor ASA i.e., Equinor ASA and Bergenbio ASA go up and down completely randomly.

Pair Corralation between Equinor ASA and Bergenbio ASA

Assuming the 90 days trading horizon Equinor ASA is expected to under-perform the Bergenbio ASA. But the stock apears to be less risky and, when comparing its historical volatility, Equinor ASA is 4.66 times less risky than Bergenbio ASA. The stock trades about -0.01 of its potential returns per unit of risk. The Bergenbio ASA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,110  in Bergenbio ASA on September 2, 2024 and sell it today you would lose (23.00) from holding Bergenbio ASA or give up 2.07% of portfolio value over 90 days.

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

Equinor ASA  vs.  Bergenbio ASA

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 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.

Bergenbio ASA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bergenbio ASA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Bergenbio ASA displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Equinor ASA and Bergenbio ASA

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

The idea behind Equinor ASA and Bergenbio 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.