Correlation Between Alphabet and Equinor ASA

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

By analyzing existing cross correlation between Alphabet Inc Class C and Equinor ASA ADR, you can compare the effects of market volatilities on Alphabet and Equinor ASA 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 Alphabet with a short position of Equinor ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Equinor ASA.

Diversification Opportunities for Alphabet and Equinor ASA

-0.25

Correlation Coefficient

Alphabet  Equinor ASA

Very good diversification

The 3 months correlation between Alphabet and Equinor is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Equinor ASA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinor ASA ADR and Alphabet 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 Alphabet Inc Class C are associated (or correlated) with Equinor ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinor ASA ADR has no effect on the direction of Alphabet i.e., Alphabet and Equinor ASA go up and down completely randomly.

Pair Corralation between Alphabet and Equinor ASA

Given the investment horizon of 90 days Alphabet Inc Class C is expected to under-perform the Equinor ASA. In addition to that, Alphabet is 1.01 times more volatile than Equinor ASA ADR. It trades about -0.16 of its total potential returns per unit of risk. Equinor ASA ADR is currently generating about 0.11 per unit of volatility. If you would invest  2,297  in Equinor ASA ADR on December 30, 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Alphabet Inc Class C  vs.  Equinor ASA ADR

Alphabet Class C

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alphabet Inc Class C has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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.

Pair Trading with Alphabet and Equinor ASA

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

The idea behind Alphabet Inc Class C and Equinor ASA ADR 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 Transaction History module to view history of all your transactions and understand their impact on performance.