Correlation Between Elkem ASA and Avance Gas
Can any of the company-specific risk be diversified away by investing in both Elkem ASA and Avance Gas 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 Elkem ASA and Avance Gas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elkem ASA and Avance Gas Holding, you can compare the effects of market volatilities on Elkem ASA and Avance Gas 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 Elkem ASA with a short position of Avance Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elkem ASA and Avance Gas.
Diversification Opportunities for Elkem ASA and Avance Gas
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Elkem and Avance is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Elkem ASA and Avance Gas Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avance Gas Holding and Elkem 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 Elkem ASA are associated (or correlated) with Avance Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avance Gas Holding has no effect on the direction of Elkem ASA i.e., Elkem ASA and Avance Gas go up and down completely randomly.
Pair Corralation between Elkem ASA and Avance Gas
Assuming the 90 days trading horizon Elkem ASA is expected to under-perform the Avance Gas. But the stock apears to be less risky and, when comparing its historical volatility, Elkem ASA is 1.42 times less risky than Avance Gas. The stock trades about -0.03 of its potential returns per unit of risk. The Avance Gas Holding is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 3,260 in Avance Gas Holding on August 28, 2024 and sell it today you would earn a total of 6,880 from holding Avance Gas Holding or generate 211.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Elkem ASA vs. Avance Gas Holding
Performance |
| Timeline |
| Elkem ASA |
| Avance Gas Holding |
Elkem ASA and Avance Gas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elkem ASA and Avance Gas
The main advantage of trading using opposite Elkem ASA and Avance Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elkem ASA position performs unexpectedly, Avance Gas 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 Avance Gas will offset losses from the drop in Avance Gas' long position.| Elkem ASA vs. Goodtech | Elkem ASA vs. Havila Shipping ASA | Elkem ASA vs. Eidesvik Offshore ASA | Elkem ASA vs. Byggma |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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