Correlation Between REC Silicon and Elkem ASA
Can any of the company-specific risk be diversified away by investing in both REC Silicon 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 REC Silicon and Elkem ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between REC Silicon ASA and Elkem ASA, you can compare the effects of market volatilities on REC Silicon 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 REC Silicon with a short position of Elkem ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of REC Silicon and Elkem ASA.
Diversification Opportunities for REC Silicon and Elkem ASA
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between REC and Elkem is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding REC Silicon ASA and Elkem ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elkem ASA and REC Silicon 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 REC Silicon 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 REC Silicon i.e., REC Silicon and Elkem ASA go up and down completely randomly.
Pair Corralation between REC Silicon and Elkem ASA
Assuming the 90 days trading horizon REC Silicon ASA is expected to under-perform the Elkem ASA. In addition to that, REC Silicon is 2.38 times more volatile than Elkem ASA. It trades about -0.06 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 2,875 in Elkem ASA on December 1, 2024 and sell it today you would lose (599.00) from holding Elkem ASA or give up 20.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
REC Silicon ASA vs. Elkem ASA
Performance |
| Timeline |
| REC Silicon ASA |
| Elkem ASA |
REC Silicon and Elkem ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with REC Silicon and Elkem ASA
The main advantage of trading using opposite REC Silicon and Elkem ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if REC Silicon 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.| REC Silicon vs. Aker Horizons AS | REC Silicon vs. MPC Container Ships | REC Silicon vs. Aker Carbon Capture | REC Silicon vs. Nordic Semiconductor ASA |
| 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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