Correlation Between Elkem ASA and Norske Skog
Can any of the company-specific risk be diversified away by investing in both Elkem ASA and Norske Skog 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 Norske Skog into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elkem ASA and Norske Skog Asa, you can compare the effects of market volatilities on Elkem ASA and Norske Skog 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 Norske Skog. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elkem ASA and Norske Skog.
Diversification Opportunities for Elkem ASA and Norske Skog
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Elkem and Norske is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Elkem ASA and Norske Skog Asa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norske Skog 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 Norske Skog. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norske Skog Asa has no effect on the direction of Elkem ASA i.e., Elkem ASA and Norske Skog go up and down completely randomly.
Pair Corralation between Elkem ASA and Norske Skog
Assuming the 90 days trading horizon Elkem ASA is expected to generate 0.32 times more return on investment than Norske Skog. However, Elkem ASA is 3.11 times less risky than Norske Skog. It trades about -0.06 of its potential returns per unit of risk. Norske Skog Asa is currently generating about -0.08 per unit of risk. If you would invest 1,855 in Elkem ASA on August 29, 2024 and sell it today you would lose (47.00) from holding Elkem ASA or give up 2.53% 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. Norske Skog Asa
Performance |
| Timeline |
| Elkem ASA |
| Norske Skog Asa |
Elkem ASA and Norske Skog Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elkem ASA and Norske Skog
The main advantage of trading using opposite Elkem ASA and Norske Skog positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elkem ASA position performs unexpectedly, Norske Skog 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 Norske Skog will offset losses from the drop in Norske Skog's long position.| Elkem ASA vs. Goodtech | Elkem ASA vs. Havila Shipping ASA | Elkem ASA vs. Eidesvik Offshore ASA | Elkem ASA vs. Byggma |
| Norske Skog vs. Elkem ASA | Norske Skog vs. DNB NOR KAPFORV | Norske Skog vs. Vow ASA | Norske Skog vs. North Energy 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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