Correlation Between Elkem ASA and Elopak AS
Can any of the company-specific risk be diversified away by investing in both Elkem ASA and Elopak AS 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 Elopak AS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elkem ASA and Elopak AS, you can compare the effects of market volatilities on Elkem ASA and Elopak AS 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 Elopak AS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elkem ASA and Elopak AS.
Diversification Opportunities for Elkem ASA and Elopak AS
Significant diversification
The 3 months correlation between Elkem and Elopak is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Elkem ASA and Elopak AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elopak AS 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 Elopak AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elopak AS has no effect on the direction of Elkem ASA i.e., Elkem ASA and Elopak AS go up and down completely randomly.
Pair Corralation between Elkem ASA and Elopak AS
Assuming the 90 days trading horizon Elkem ASA is expected to generate 1.26 times more return on investment than Elopak AS. However, Elkem ASA is 1.26 times more volatile than Elopak AS. It trades about 0.05 of its potential returns per unit of risk. Elopak AS is currently generating about -0.04 per unit of risk. If you would invest 1,794 in Elkem ASA on September 1, 2024 and sell it today you would earn a total of 27.00 from holding Elkem ASA or generate 1.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Elkem ASA vs. Elopak AS
Performance |
| Timeline |
| Elkem ASA |
| Elopak AS |
Elkem ASA and Elopak AS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elkem ASA and Elopak AS
The main advantage of trading using opposite Elkem ASA and Elopak AS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elkem ASA position performs unexpectedly, Elopak AS 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 Elopak AS will offset losses from the drop in Elopak AS'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 |
| Elopak AS vs. Elkem ASA | Elopak AS vs. Norske Skog Asa | Elopak AS vs. Kitron ASA | Elopak AS vs. Europris 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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