Correlation Between Elkem ASA and Ocean Sun
Can any of the company-specific risk be diversified away by investing in both Elkem ASA and Ocean Sun 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 Ocean Sun into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elkem ASA and Ocean Sun As, you can compare the effects of market volatilities on Elkem ASA and Ocean Sun 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 Ocean Sun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elkem ASA and Ocean Sun.
Diversification Opportunities for Elkem ASA and Ocean Sun
Modest diversification
The 3 months correlation between Elkem and Ocean is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Elkem ASA and Ocean Sun As in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ocean Sun 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 Ocean Sun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ocean Sun As has no effect on the direction of Elkem ASA i.e., Elkem ASA and Ocean Sun go up and down completely randomly.
Pair Corralation between Elkem ASA and Ocean Sun
Assuming the 90 days trading horizon Elkem ASA is expected to generate 0.41 times more return on investment than Ocean Sun. However, Elkem ASA is 2.46 times less risky than Ocean Sun. It trades about -0.05 of its potential returns per unit of risk. Ocean Sun As is currently generating about -0.05 per unit of risk. If you would invest 2,176 in Elkem ASA on September 1, 2024 and sell it today you would lose (355.00) from holding Elkem ASA or give up 16.31% 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. Ocean Sun As
Performance |
| Timeline |
| Elkem ASA |
| Ocean Sun As |
Elkem ASA and Ocean Sun Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elkem ASA and Ocean Sun
The main advantage of trading using opposite Elkem ASA and Ocean Sun positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elkem ASA position performs unexpectedly, Ocean Sun 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 Ocean Sun will offset losses from the drop in Ocean Sun'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 |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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