Correlation Between Golden Ocean and Equinor ASA

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

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

Diversification Opportunities for Golden Ocean and Equinor ASA

0.82

Correlation Coefficient

Golden Ocean  Equinor ASA

Very poor diversification

The 3 months correlation between Golden and Equinor is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Golden Ocean Group and Equinor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinor ASA and Golden Ocean 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 Golden Ocean Group 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 Golden Ocean i.e., Golden Ocean and Equinor ASA go up and down completely randomly.

Pair Corralation between Golden Ocean and Equinor ASA

Assuming the 90 days trading horizon Golden Ocean Group is expected to generate 1.8 times more return on investment than Equinor ASA. However, Golden Ocean is 1.8 times more volatile than Equinor ASA. It trades about 0.25 of its potential returns per unit of risk. Equinor ASA is currently generating about 0.19 per unit of risk. If you would invest  11,665  in Golden Ocean Group on February 18, 2024 and sell it today you would earn a total of  4,455  from holding Golden Ocean Group or generate 38.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Golden Ocean Group  vs.  Equinor ASA

Golden Ocean Group

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Ocean Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Golden Ocean disclosed solid returns over the last few months and may actually be approaching a breakup point.

Equinor ASA

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Equinor ASA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Equinor ASA disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Golden Ocean and Equinor ASA

The main advantage of trading using opposite Golden Ocean and Equinor ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Golden Ocean 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 Golden Ocean Group 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.