Correlation Between Elkem ASA and Bouvet
Can any of the company-specific risk be diversified away by investing in both Elkem ASA and Bouvet 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 Bouvet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elkem ASA and Bouvet, you can compare the effects of market volatilities on Elkem ASA and Bouvet 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 Bouvet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elkem ASA and Bouvet.
Diversification Opportunities for Elkem ASA and Bouvet
Very good diversification
The 3 months correlation between Elkem and Bouvet is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Elkem ASA and Bouvet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bouvet 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 Bouvet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bouvet has no effect on the direction of Elkem ASA i.e., Elkem ASA and Bouvet go up and down completely randomly.
Pair Corralation between Elkem ASA and Bouvet
Assuming the 90 days trading horizon Elkem ASA is expected to under-perform the Bouvet. In addition to that, Elkem ASA is 1.49 times more volatile than Bouvet. It trades about -0.03 of its total potential returns per unit of risk. Bouvet is currently generating about 0.03 per unit of volatility. If you would invest 6,417 in Bouvet on September 1, 2024 and sell it today you would earn a total of 703.00 from holding Bouvet or generate 10.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Elkem ASA vs. Bouvet
Performance |
| Timeline |
| Elkem ASA |
| Bouvet |
Elkem ASA and Bouvet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elkem ASA and Bouvet
The main advantage of trading using opposite Elkem ASA and Bouvet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elkem ASA position performs unexpectedly, Bouvet 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 Bouvet will offset losses from the drop in Bouvet's long position.| Elkem ASA vs. Storebrand ASA | Elkem ASA vs. Yara International ASA | Elkem ASA vs. Lery Seafood Group | Elkem ASA vs. DnB ASA |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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