Correlation Between Equinor ASA and Pf Bakkafrost

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

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

Diversification Opportunities for Equinor ASA and Pf Bakkafrost

-0.49

Correlation Coefficient

Equinor ASA  Pf Bakkafrost

Very good diversification

The 3 months correlation between Equinor and BAKKA is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Equinor ASA and Pf Bakkafrost in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pf Bakkafrost 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 Pf Bakkafrost. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pf Bakkafrost has no effect on the direction of Equinor ASA i.e., Equinor ASA and Pf Bakkafrost go up and down completely randomly.

Pair Corralation between Equinor ASA and Pf Bakkafrost

Assuming the 90 days trading horizon Equinor ASA is expected to generate 0.92 times more return on investment than Pf Bakkafrost. However, Equinor ASA is 1.08 times less risky than Pf Bakkafrost. It trades about 0.08 of its potential returns per unit of risk. Pf Bakkafrost is currently generating about -0.22 per unit of risk. If you would invest  29,800  in Equinor ASA on March 31, 2024 and sell it today you would earn a total of  595.00  from holding Equinor ASA or generate 2.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Equinor ASA  vs.  Pf Bakkafrost

Equinor ASA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Equinor ASA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic 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.

Pf Bakkafrost

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pf Bakkafrost has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in July 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Equinor ASA and Pf Bakkafrost

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

The idea behind Equinor ASA and Pf Bakkafrost 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.