Correlation Between Subsea 7 and Elkem ASA
Can any of the company-specific risk be diversified away by investing in both Subsea 7 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 Subsea 7 and Elkem ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Subsea 7 SA and Elkem ASA, you can compare the effects of market volatilities on Subsea 7 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 Subsea 7 with a short position of Elkem ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Subsea 7 and Elkem ASA.
Diversification Opportunities for Subsea 7 and Elkem ASA
Significant diversification
The 3 months correlation between Subsea and Elkem is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Subsea 7 SA and Elkem ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elkem ASA and Subsea 7 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 Subsea 7 SA 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 Subsea 7 i.e., Subsea 7 and Elkem ASA go up and down completely randomly.
Pair Corralation between Subsea 7 and Elkem ASA
Assuming the 90 days trading horizon Subsea 7 SA is expected to generate 0.82 times more return on investment than Elkem ASA. However, Subsea 7 SA is 1.21 times less risky than Elkem ASA. It trades about 0.3 of its potential returns per unit of risk. Elkem ASA is currently generating about -0.04 per unit of risk. If you would invest 16,941 in Subsea 7 SA on August 27, 2024 and sell it today you would earn a total of 1,569 from holding Subsea 7 SA or generate 9.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Subsea 7 SA vs. Elkem ASA
Performance |
| Timeline |
| Subsea 7 SA |
| Elkem ASA |
Subsea 7 and Elkem ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Subsea 7 and Elkem ASA
The main advantage of trading using opposite Subsea 7 and Elkem ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Subsea 7 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.| Subsea 7 vs. TGS NOPEC Geophysical | Subsea 7 vs. Aker Solutions ASA | Subsea 7 vs. Storebrand ASA | Subsea 7 vs. Dno 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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