Correlation Between ELMOS SEMICONDUCTOR and Eidesvik Offshore
Can any of the company-specific risk be diversified away by investing in both ELMOS SEMICONDUCTOR and Eidesvik Offshore 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 ELMOS SEMICONDUCTOR and Eidesvik Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ELMOS SEMICONDUCTOR and Eidesvik Offshore ASA, you can compare the effects of market volatilities on ELMOS SEMICONDUCTOR and Eidesvik Offshore 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 ELMOS SEMICONDUCTOR with a short position of Eidesvik Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of ELMOS SEMICONDUCTOR and Eidesvik Offshore.
Diversification Opportunities for ELMOS SEMICONDUCTOR and Eidesvik Offshore
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between ELMOS and Eidesvik is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding ELMOS SEMICONDUCTOR and Eidesvik Offshore ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eidesvik Offshore ASA and ELMOS SEMICONDUCTOR 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 ELMOS SEMICONDUCTOR are associated (or correlated) with Eidesvik Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eidesvik Offshore ASA has no effect on the direction of ELMOS SEMICONDUCTOR i.e., ELMOS SEMICONDUCTOR and Eidesvik Offshore go up and down completely randomly.
Pair Corralation between ELMOS SEMICONDUCTOR and Eidesvik Offshore
Assuming the 90 days trading horizon ELMOS SEMICONDUCTOR is expected to generate 1.54 times more return on investment than Eidesvik Offshore. However, ELMOS SEMICONDUCTOR is 1.54 times more volatile than Eidesvik Offshore ASA. It trades about 0.18 of its potential returns per unit of risk. Eidesvik Offshore ASA is currently generating about 0.03 per unit of risk. If you would invest 6,110 in ELMOS SEMICONDUCTOR on October 30, 2024 and sell it today you would earn a total of 1,350 from holding ELMOS SEMICONDUCTOR or generate 22.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ELMOS SEMICONDUCTOR vs. Eidesvik Offshore ASA
Performance |
| Timeline |
| ELMOS SEMICONDUCTOR |
| Eidesvik Offshore ASA |
ELMOS SEMICONDUCTOR and Eidesvik Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ELMOS SEMICONDUCTOR and Eidesvik Offshore
The main advantage of trading using opposite ELMOS SEMICONDUCTOR and Eidesvik Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ELMOS SEMICONDUCTOR position performs unexpectedly, Eidesvik Offshore 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 Eidesvik Offshore will offset losses from the drop in Eidesvik Offshore's long position.The idea behind ELMOS SEMICONDUCTOR and Eidesvik Offshore 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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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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