Correlation Between Equinor ASA and ValOre Metals

Can any of the company-specific risk be diversified away by investing in both Equinor ASA and ValOre Metals 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 ValOre Metals 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 ValOre Metals Corp, you can compare the effects of market volatilities on Equinor ASA and ValOre Metals 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 ValOre Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equinor ASA and ValOre Metals.

Diversification Opportunities for Equinor ASA and ValOre Metals

-0.04

Correlation Coefficient

Equinor ASA  ValOre Metals

Good diversification

The 3 months correlation between Equinor and ValOre is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Equinor ASA ADR and ValOre Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ValOre Metals Corp 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 ValOre Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ValOre Metals Corp has no effect on the direction of Equinor ASA i.e., Equinor ASA and ValOre Metals go up and down completely randomly.

Pair Corralation between Equinor ASA and ValOre Metals

Given the investment horizon of 90 days Equinor ASA ADR is expected to under-perform the ValOre Metals. But the stock apears to be less risky and, when comparing its historical volatility, Equinor ASA ADR is 4.52 times less risky than ValOre Metals. The stock trades about -0.01 of its potential returns per unit of risk. The ValOre Metals Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  20.00  in ValOre Metals Corp on October 9, 2024 and sell it today you would lose (15.52) from holding ValOre Metals Corp or give up 77.6% of portfolio value over 90 days.

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

Equinor ASA ADR  vs.  ValOre Metals Corp

Equinor ASA ADR

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Equinor ASA ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Equinor ASA is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

ValOre Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ValOre Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ValOre Metals is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Equinor ASA and ValOre Metals

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

The idea behind Equinor ASA ADR and ValOre Metals Corp 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.