Correlation Between Goodtech and Elkem ASA
Can any of the company-specific risk be diversified away by investing in both Goodtech and Elkem ASA 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 Goodtech and Elkem ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Goodtech and Elkem ASA, you can compare the effects of market volatilities on Goodtech and Elkem ASA 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 Goodtech with a short position of Elkem ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goodtech and Elkem ASA.
Diversification Opportunities for Goodtech and Elkem ASA
Very weak diversification
The 3 months correlation between Goodtech and Elkem is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Goodtech and Elkem ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elkem ASA and Goodtech 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 Goodtech are associated (or correlated) with Elkem ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elkem ASA has no effect on the direction of Goodtech i.e., Goodtech and Elkem ASA go up and down completely randomly.
Pair Corralation between Goodtech and Elkem ASA
Assuming the 90 days trading horizon Goodtech is expected to under-perform the Elkem ASA. In addition to that, Goodtech is 1.12 times more volatile than Elkem ASA. It trades about -0.23 of its total potential returns per unit of risk. Elkem ASA is currently generating about 0.01 per unit of volatility. If you would invest 1,818 in Elkem ASA on August 25, 2024 and sell it today you would earn a total of 4.00 from holding Elkem ASA or generate 0.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Goodtech vs. Elkem ASA
Performance |
| Timeline |
| Goodtech |
| Elkem ASA |
Goodtech and Elkem ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Goodtech and Elkem ASA
The main advantage of trading using opposite Goodtech and Elkem ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goodtech position performs unexpectedly, Elkem ASA 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 Elkem ASA will offset losses from the drop in Elkem ASA's long position.| Goodtech vs. Eidesvik Offshore ASA | Goodtech vs. Borgestad A | Goodtech vs. Kitron ASA | Goodtech vs. Havila Shipping ASA |
| Elkem ASA vs. Goodtech | Elkem ASA vs. Havila Shipping ASA | Elkem ASA vs. Eidesvik Offshore ASA | Elkem ASA vs. Byggma |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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