Correlation Between Elkem ASA and Norwegian Air
Can any of the company-specific risk be diversified away by investing in both Elkem ASA and Norwegian Air 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 Norwegian Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elkem ASA and Norwegian Air Shuttle, you can compare the effects of market volatilities on Elkem ASA and Norwegian Air 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 Norwegian Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elkem ASA and Norwegian Air.
Diversification Opportunities for Elkem ASA and Norwegian Air
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Elkem and Norwegian is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Elkem ASA and Norwegian Air Shuttle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norwegian Air Shuttle 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 Norwegian Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norwegian Air Shuttle has no effect on the direction of Elkem ASA i.e., Elkem ASA and Norwegian Air go up and down completely randomly.
Pair Corralation between Elkem ASA and Norwegian Air
Assuming the 90 days trading horizon Elkem ASA is expected to generate 1.84 times more return on investment than Norwegian Air. However, Elkem ASA is 1.84 times more volatile than Norwegian Air Shuttle. It trades about 0.26 of its potential returns per unit of risk. Norwegian Air Shuttle is currently generating about 0.02 per unit of risk. If you would invest 1,706 in Elkem ASA on November 9, 2024 and sell it today you would earn a total of 530.00 from holding Elkem ASA or generate 31.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Elkem ASA vs. Norwegian Air Shuttle
Performance |
| Timeline |
| Elkem ASA |
| Norwegian Air Shuttle |
Elkem ASA and Norwegian Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elkem ASA and Norwegian Air
The main advantage of trading using opposite Elkem ASA and Norwegian Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elkem ASA position performs unexpectedly, Norwegian Air 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 Norwegian Air will offset losses from the drop in Norwegian Air'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 |
| Norwegian Air vs. Danske Bank AS | Norwegian Air vs. Kongsberg Automotive Holding | Norwegian Air vs. Nel 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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