Correlation Between Equinor ASA and Spindletop

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

Diversification Opportunities for Equinor ASA and Spindletop

0.06

Correlation Coefficient

Equinor ASA  Spindletop

Significant diversification

The 3 months correlation between Equinor and Spindletop is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Equinor ASA ADR and Spindletop OG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spindletop OG 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 Spindletop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spindletop OG has no effect on the direction of Equinor ASA i.e., Equinor ASA and Spindletop go up and down completely randomly.

Pair Corralation between Equinor ASA and Spindletop

Given the investment horizon of 90 days Equinor ASA ADR is expected to under-perform the Spindletop. But the stock apears to be less risky and, when comparing its historical volatility, Equinor ASA ADR is 2.65 times less risky than Spindletop. The stock trades about -0.01 of its potential returns per unit of risk. The Spindletop OG is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  282.00  in Spindletop OG on October 11, 2024 and sell it today you would lose (82.00) from holding Spindletop OG or give up 29.08% of portfolio value over 90 days.

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

Equinor ASA ADR  vs.  Spindletop OG

Equinor ASA ADR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Equinor ASA ADR are ranked lower than 1 (%) 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 latest stock price agitation, may contribute to short-term losses for the retail investors.

Spindletop OG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spindletop OG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Equinor ASA and Spindletop

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

The idea behind Equinor ASA ADR and Spindletop OG 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.