Correlation Between Equinor ASA and MOL PLC

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

By analyzing existing cross correlation between Equinor ASA and MOL PLC ADR, you can compare the effects of market volatilities on Equinor ASA and MOL PLC 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 MOL PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equinor ASA and MOL PLC.

Diversification Opportunities for Equinor ASA and MOL PLC

0.38

Correlation Coefficient

Equinor ASA  MOL PLC

Weak diversification

The 3 months correlation between Equinor and MOL is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Equinor ASA and MOL PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MOL PLC ADR 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 are associated (or correlated) with MOL PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MOL PLC ADR has no effect on the direction of Equinor ASA i.e., Equinor ASA and MOL PLC go up and down completely randomly.

Pair Corralation between Equinor ASA and MOL PLC

Assuming the 90 days horizon Equinor ASA is expected to generate 1.06 times more return on investment than MOL PLC. However, Equinor ASA is 1.06 times more volatile than MOL PLC ADR. It trades about 0.13 of its potential returns per unit of risk. MOL PLC ADR is currently generating about 0.13 per unit of risk. If you would invest  2,291  in Equinor ASA on December 28, 2024 and sell it today you would earn a total of  370.00  from holding Equinor ASA or generate 16.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.67%
Values	Daily Returns

Equinor ASA  vs.  MOL PLC ADR

Equinor ASA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Equinor ASA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical indicators, Equinor ASA reported solid returns over the last few months and may actually be approaching a breakup point.

MOL PLC ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MOL PLC ADR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, MOL PLC showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Equinor ASA and MOL PLC

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

The idea behind Equinor ASA and MOL PLC 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.