Correlation Between Elkem ASA and Sparebanken Ost
Can any of the company-specific risk be diversified away by investing in both Elkem ASA and Sparebanken Ost 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 Sparebanken Ost into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elkem ASA and Sparebanken Ost, you can compare the effects of market volatilities on Elkem ASA and Sparebanken Ost 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 Sparebanken Ost. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elkem ASA and Sparebanken Ost.
Diversification Opportunities for Elkem ASA and Sparebanken Ost
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Elkem and Sparebanken is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Elkem ASA and Sparebanken Ost in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparebanken Ost 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 Sparebanken Ost. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparebanken Ost has no effect on the direction of Elkem ASA i.e., Elkem ASA and Sparebanken Ost go up and down completely randomly.
Pair Corralation between Elkem ASA and Sparebanken Ost
Assuming the 90 days trading horizon Elkem ASA is expected to under-perform the Sparebanken Ost. In addition to that, Elkem ASA is 1.59 times more volatile than Sparebanken Ost. It trades about -0.03 of its total potential returns per unit of risk. Sparebanken Ost is currently generating about 0.09 per unit of volatility. If you would invest 4,330 in Sparebanken Ost on September 4, 2024 and sell it today you would earn a total of 2,370 from holding Sparebanken Ost or generate 54.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Elkem ASA vs. Sparebanken Ost
Performance |
| Timeline |
| Elkem ASA |
| Sparebanken Ost |
Elkem ASA and Sparebanken Ost Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elkem ASA and Sparebanken Ost
The main advantage of trading using opposite Elkem ASA and Sparebanken Ost positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elkem ASA position performs unexpectedly, Sparebanken Ost 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 Sparebanken Ost will offset losses from the drop in Sparebanken Ost'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 |
| Sparebanken Ost vs. Melhus Sparebank | Sparebanken Ost vs. Holand og Setskog | Sparebanken Ost vs. Helgeland Sparebank | Sparebanken Ost vs. Elkem 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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