Correlation Between Equinor ASA and Surge Energy

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

Diversification Opportunities for Equinor ASA and Surge Energy

0.79

Correlation Coefficient

Equinor ASA  Surge Energy

Poor diversification

The 3 months correlation between Equinor and Surge is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Equinor ASA ADR and Surge Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Surge Energy 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 Surge Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Surge Energy has no effect on the direction of Equinor ASA i.e., Equinor ASA and Surge Energy go up and down completely randomly.

Pair Corralation between Equinor ASA and Surge Energy

Given the investment horizon of 90 days Equinor ASA ADR is expected to generate 0.82 times more return on investment than Surge Energy. However, Equinor ASA ADR is 1.22 times less risky than Surge Energy. It trades about 0.12 of its potential returns per unit of risk. Surge Energy is currently generating about 0.09 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  317.00  from holding Equinor ASA ADR or generate 13.8% return on investment over 90 days.

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

Equinor ASA ADR  vs.  Surge Energy

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 9 (%) 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.

Surge Energy

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Surge Energy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Surge Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Equinor ASA and Surge Energy

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

The idea behind Equinor ASA ADR and Surge Energy 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.

Check out your portfolio center.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.