Correlation Between Equinor ASA and Petrogress

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

Diversification Opportunities for Equinor ASA and Petrogress

0.28

Correlation Coefficient

Equinor ASA  Petrogress

Modest diversification

The 3 months correlation between Equinor and Petrogress is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Equinor ASA ADR and Petrogress in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrogress 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 Petrogress. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrogress has no effect on the direction of Equinor ASA i.e., Equinor ASA and Petrogress go up and down completely randomly.

Pair Corralation between Equinor ASA and Petrogress

Given the investment horizon of 90 days Equinor ASA ADR is expected to under-perform the Petrogress. But the stock apears to be less risky and, when comparing its historical volatility, Equinor ASA ADR is 16.18 times less risky than Petrogress. The stock trades about -0.03 of its potential returns per unit of risk. The Petrogress is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.02  in Petrogress on September 14, 2024 and sell it today you would lose (0.01) from holding Petrogress or give up 50.0% of portfolio value over 90 days.

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

Equinor ASA ADR  vs.  Petrogress

Equinor ASA ADR

Risk-Adjusted Performance

0 of 100

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 recent stock price agitation, may contribute to short-term losses for the retail investors.

Petrogress

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Petrogress are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Petrogress unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Equinor ASA and Petrogress

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

The idea behind Equinor ASA ADR and Petrogress 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.