Correlation Between GP Investments and EQUINOR ASA

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

By analyzing existing cross correlation between GP Investments and EQUINOR ASA DRN, you can compare the effects of market volatilities on GP Investments 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 GP Investments with a short position of EQUINOR ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of GP Investments and EQUINOR ASA.

Diversification Opportunities for GP Investments and EQUINOR ASA

0.1

Correlation Coefficient

GP Investments  EQUINOR ASA

Average diversification

The 3 months correlation between GPIV33 and EQUINOR is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding GP Investments and EQUINOR ASA DRN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EQUINOR ASA DRN and GP Investments 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 GP Investments 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 DRN has no effect on the direction of GP Investments i.e., GP Investments and EQUINOR ASA go up and down completely randomly.

Pair Corralation between GP Investments and EQUINOR ASA

Assuming the 90 days trading horizon GP Investments is expected to generate 1.44 times more return on investment than EQUINOR ASA. However, GP Investments is 1.44 times more volatile than EQUINOR ASA DRN. It trades about 0.05 of its potential returns per unit of risk. EQUINOR ASA DRN is currently generating about 0.0 per unit of risk. If you would invest  373.00  in GP Investments on October 26, 2024 and sell it today you would earn a total of  23.00  from holding GP Investments or generate 6.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

GP Investments  vs.  EQUINOR ASA DRN

GP Investments

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GP Investments are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain forward indicators, GP Investments may actually be approaching a critical reversion point that can send shares even higher in February 2025.

EQUINOR ASA DRN

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EQUINOR ASA DRN has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, EQUINOR ASA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GP Investments and EQUINOR ASA

The main advantage of trading using opposite GP Investments and EQUINOR ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GP Investments 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 GP Investments and EQUINOR ASA DRN 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.