Correlation Between Elkem ASA and Eidesvik Offshore
Can any of the company-specific risk be diversified away by investing in both Elkem ASA 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 Elkem ASA and Eidesvik Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elkem ASA and Eidesvik Offshore ASA, you can compare the effects of market volatilities on Elkem ASA 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 Elkem ASA with a short position of Eidesvik Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elkem ASA and Eidesvik Offshore.
Diversification Opportunities for Elkem ASA and Eidesvik Offshore
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Elkem and Eidesvik is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Elkem ASA 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 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 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 Elkem ASA i.e., Elkem ASA and Eidesvik Offshore go up and down completely randomly.
Pair Corralation between Elkem ASA and Eidesvik Offshore
Assuming the 90 days trading horizon Elkem ASA is expected to under-perform the Eidesvik Offshore. But the stock apears to be less risky and, when comparing its historical volatility, Elkem ASA is 1.27 times less risky than Eidesvik Offshore. The stock trades about -0.06 of its potential returns per unit of risk. The Eidesvik Offshore ASA is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 1,364 in Eidesvik Offshore ASA on August 29, 2024 and sell it today you would lose (14.00) from holding Eidesvik Offshore ASA or give up 1.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Elkem ASA vs. Eidesvik Offshore ASA
Performance |
| Timeline |
| Elkem ASA |
| Eidesvik Offshore ASA |
Elkem ASA and Eidesvik Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elkem ASA and Eidesvik Offshore
The main advantage of trading using opposite Elkem ASA and Eidesvik Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elkem ASA 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.| Elkem ASA vs. Goodtech | Elkem ASA vs. Havila Shipping ASA | Elkem ASA vs. Eidesvik Offshore ASA | Elkem ASA vs. Byggma |
| Eidesvik Offshore vs. Solstad Offsho | Eidesvik Offshore vs. Havila Shipping ASA | Eidesvik Offshore vs. Prosafe SE | Eidesvik Offshore vs. BW Offshore |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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