Correlation Between Elkem ASA and Deep Value
Can any of the company-specific risk be diversified away by investing in both Elkem ASA and Deep Value 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 Deep Value into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elkem ASA and Deep Value Driller, you can compare the effects of market volatilities on Elkem ASA and Deep Value 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 Deep Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elkem ASA and Deep Value.
Diversification Opportunities for Elkem ASA and Deep Value
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Elkem and Deep is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Elkem ASA and Deep Value Driller in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deep Value Driller 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 Deep Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deep Value Driller has no effect on the direction of Elkem ASA i.e., Elkem ASA and Deep Value go up and down completely randomly.
Pair Corralation between Elkem ASA and Deep Value
Assuming the 90 days trading horizon Elkem ASA is expected to under-perform the Deep Value. In addition to that, Elkem ASA is 1.05 times more volatile than Deep Value Driller. It trades about -0.03 of its total potential returns per unit of risk. Deep Value Driller is currently generating about -0.02 per unit of volatility. If you would invest 1,870 in Deep Value Driller on August 29, 2024 and sell it today you would lose (222.00) from holding Deep Value Driller or give up 11.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Elkem ASA vs. Deep Value Driller
Performance |
| Timeline |
| Elkem ASA |
| Deep Value Driller |
Elkem ASA and Deep Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elkem ASA and Deep Value
The main advantage of trading using opposite Elkem ASA and Deep Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elkem ASA position performs unexpectedly, Deep Value 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 Deep Value will offset losses from the drop in Deep Value'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 |
| Deep Value vs. Austevoll Seafood ASA | Deep Value vs. NorAm Drilling AS | Deep Value vs. Odfjell Technology | Deep Value vs. Norwegian Air Shuttle |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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