Correlation Between Yara International and Equinor ASA

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

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

Diversification Opportunities for Yara International and Equinor ASA

0.02

Correlation Coefficient

Yara International  Equinor ASA

Significant diversification

The 3 months correlation between Yara and Equinor is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Yara International ASA and Equinor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinor ASA and Yara International 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 Yara International ASA 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 has no effect on the direction of Yara International i.e., Yara International and Equinor ASA go up and down completely randomly.

Pair Corralation between Yara International and Equinor ASA

Assuming the 90 days trading horizon Yara International ASA is expected to generate 0.7 times more return on investment than Equinor ASA. However, Yara International ASA is 1.42 times less risky than Equinor ASA. It trades about 0.02 of its potential returns per unit of risk. Equinor ASA is currently generating about -0.02 per unit of risk. If you would invest  30,710  in Yara International ASA on August 31, 2024 and sell it today you would earn a total of  350.00  from holding Yara International ASA or generate 1.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Yara International ASA  vs.  Equinor ASA

Yara International ASA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yara International ASA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Yara International is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Equinor ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equinor ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Equinor ASA is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Yara International and Equinor ASA

The main advantage of trading using opposite Yara International and Equinor ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yara International 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 Yara International ASA and Equinor ASA 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.