Correlation Between Equinor ASA and Sparebank

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

By analyzing existing cross correlation between Equinor ASA and Sparebank 1 SR, you can compare the effects of market volatilities on Equinor ASA and Sparebank 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 Sparebank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equinor ASA and Sparebank.

Diversification Opportunities for Equinor ASA and Sparebank

-0.12

Correlation Coefficient

Equinor ASA  Sparebank

Good diversification

The 3 months correlation between Equinor and Sparebank is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Equinor ASA and Sparebank 1 SR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparebank 1 SR 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 Sparebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparebank 1 SR has no effect on the direction of Equinor ASA i.e., Equinor ASA and Sparebank go up and down completely randomly.

Pair Corralation between Equinor ASA and Sparebank

Assuming the 90 days trading horizon Equinor ASA is expected to under-perform the Sparebank. In addition to that, Equinor ASA is 1.59 times more volatile than Sparebank 1 SR. It trades about -0.01 of its total potential returns per unit of risk. Sparebank 1 SR is currently generating about 0.1 per unit of volatility. If you would invest  13,440  in Sparebank 1 SR on September 2, 2024 and sell it today you would earn a total of  1,000.00  from holding Sparebank 1 SR or generate 7.44% return on investment over 90 days.

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

Equinor ASA  vs.  Sparebank 1 SR

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.

Sparebank 1 SR

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebank 1 SR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Sparebank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Equinor ASA and Sparebank

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

The idea behind Equinor ASA and Sparebank 1 SR 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.