Correlation Between Adams Resources and Equinor ASA
Can any of the company-specific risk be diversified away by investing in both Adams Resources 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 Adams Resources and Equinor ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adams Resources Energy and Equinor ASA ADR, you can compare the effects of market volatilities on Adams Resources 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 Adams Resources with a short position of Equinor ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adams Resources and Equinor ASA.
Diversification Opportunities for Adams Resources and Equinor ASA
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Adams and Equinor is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Adams Resources Energy 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 Adams Resources 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 Adams Resources Energy 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 Adams Resources i.e., Adams Resources and Equinor ASA go up and down completely randomly.
Pair Corralation between Adams Resources and Equinor ASA
Allowing for the 90-day total investment horizon Adams Resources Energy is expected to under-perform the Equinor ASA. In addition to that, Adams Resources is 1.22 times more volatile than Equinor ASA ADR. It trades about -0.02 of its total potential returns per unit of risk. Equinor ASA ADR is currently generating about 0.01 per unit of volatility. If you would invest 2,694 in Equinor ASA ADR on January 20, 2024 and sell it today you would earn a total of 29.00 from holding Equinor ASA ADR or generate 1.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Adams Resources Energy vs. Equinor ASA ADR
Performance |
| Timeline |
| Adams Resources Energy |
| Equinor ASA ADR |
Adams Resources and Equinor ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adams Resources and Equinor ASA
The main advantage of trading using opposite Adams Resources and Equinor ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adams Resources 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.| Adams Resources vs. Delek Logistics Partners | Adams Resources vs. Crossamerica Partners LP | Adams Resources vs. Sunoco LP |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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