Correlation Between North Energy and Elkem ASA
Can any of the company-specific risk be diversified away by investing in both North Energy 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 North Energy and Elkem ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North Energy ASA and Elkem ASA, you can compare the effects of market volatilities on North Energy 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 North Energy with a short position of Elkem ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of North Energy and Elkem ASA.
Diversification Opportunities for North Energy and Elkem ASA
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between North and Elkem is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding North Energy ASA and Elkem ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elkem ASA and North Energy 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 North Energy ASA 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 North Energy i.e., North Energy and Elkem ASA go up and down completely randomly.
Pair Corralation between North Energy and Elkem ASA
Assuming the 90 days trading horizon North Energy is expected to generate 11.03 times less return on investment than Elkem ASA. But when comparing it to its historical volatility, North Energy ASA is 1.8 times less risky than Elkem ASA. It trades about 0.04 of its potential returns per unit of risk. Elkem ASA is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 1,706 in Elkem ASA on November 9, 2024 and sell it today you would earn a total of 530.00 from holding Elkem ASA or generate 31.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
North Energy ASA vs. Elkem ASA
Performance |
| Timeline |
| North Energy ASA |
| Elkem ASA |
North Energy and Elkem ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North Energy and Elkem ASA
The main advantage of trading using opposite North Energy and Elkem ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North Energy 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.| North Energy vs. Melhus Sparebank | North Energy vs. Sparebank 1 SMN | North Energy vs. Sunndal Sparebank | North Energy vs. Arcticzymes Technologies ASA |
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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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