Correlation Between Icelandic Salmon and Mowi ASA
Can any of the company-specific risk be diversified away by investing in both Icelandic Salmon and Mowi 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 Icelandic Salmon and Mowi ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Icelandic Salmon As and Mowi ASA, you can compare the effects of market volatilities on Icelandic Salmon and Mowi 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 Icelandic Salmon with a short position of Mowi ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Icelandic Salmon and Mowi ASA.
Diversification Opportunities for Icelandic Salmon and Mowi ASA
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Icelandic and Mowi is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Icelandic Salmon As and Mowi ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mowi ASA and Icelandic Salmon 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 Icelandic Salmon As are associated (or correlated) with Mowi ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mowi ASA has no effect on the direction of Icelandic Salmon i.e., Icelandic Salmon and Mowi ASA go up and down completely randomly.
Pair Corralation between Icelandic Salmon and Mowi ASA
Assuming the 90 days trading horizon Icelandic Salmon As is expected to under-perform the Mowi ASA. In addition to that, Icelandic Salmon is 1.68 times more volatile than Mowi ASA. It trades about -0.01 of its total potential returns per unit of risk. Mowi ASA is currently generating about 0.06 per unit of volatility. If you would invest 14,077 in Mowi ASA on August 29, 2024 and sell it today you would earn a total of 5,923 from holding Mowi ASA or generate 42.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Icelandic Salmon As vs. Mowi ASA
Performance |
| Timeline |
| Icelandic Salmon |
| Mowi ASA |
Icelandic Salmon and Mowi ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Icelandic Salmon and Mowi ASA
The main advantage of trading using opposite Icelandic Salmon and Mowi ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Icelandic Salmon position performs unexpectedly, Mowi 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 Mowi ASA will offset losses from the drop in Mowi ASA's long position.| Icelandic Salmon vs. Andfjord Salmon AS | Icelandic Salmon vs. Elkem ASA | Icelandic Salmon vs. Vow ASA | Icelandic Salmon vs. North Energy ASA |
| Mowi ASA vs. Andfjord Salmon AS | Mowi ASA vs. Elkem ASA | Mowi ASA vs. Vow ASA | Mowi ASA 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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