Correlation Between Equinor ASA and Calfrac Well

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

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

Diversification Opportunities for Equinor ASA and Calfrac Well

0.12

Correlation Coefficient

Equinor ASA  Calfrac Well

Average diversification

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

Pair Corralation between Equinor ASA and Calfrac Well

Given the investment horizon of 90 days Equinor ASA ADR is expected to generate 1.14 times more return on investment than Calfrac Well. However, Equinor ASA is 1.14 times more volatile than Calfrac Well Services. It trades about 0.11 of its potential returns per unit of risk. Calfrac Well Services is currently generating about 0.0 per unit of risk. If you would invest  2,297  in Equinor ASA ADR on December 29, 2024 and sell it today you would earn a total of  306.00  from holding Equinor ASA ADR or generate 13.32% return on investment over 90 days.

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

Equinor ASA ADR  vs.  Calfrac Well Services

Equinor ASA ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Equinor ASA ADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Equinor ASA reported solid returns over the last few months and may actually be approaching a breakup point.

Calfrac Well Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Calfrac Well Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Calfrac Well is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Equinor ASA and Calfrac Well

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

The idea behind Equinor ASA ADR and Calfrac Well Services 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.