Correlation Between XXL ASA and Elkem ASA
Can any of the company-specific risk be diversified away by investing in both XXL ASA 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 XXL ASA and Elkem ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between XXL ASA and Elkem ASA, you can compare the effects of market volatilities on XXL ASA 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 XXL ASA with a short position of Elkem ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of XXL ASA and Elkem ASA.
Diversification Opportunities for XXL ASA and Elkem ASA
Average diversification
The 3 months correlation between XXL and Elkem is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding XXL ASA and Elkem ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elkem ASA and XXL ASA 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 XXL 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 XXL ASA i.e., XXL ASA and Elkem ASA go up and down completely randomly.
Pair Corralation between XXL ASA and Elkem ASA
Assuming the 90 days trading horizon XXL ASA is expected to under-perform the Elkem ASA. In addition to that, XXL ASA is 1.08 times more volatile than Elkem ASA. It trades about -0.15 of its total potential returns per unit of risk. Elkem ASA is currently generating about 0.26 per unit of volatility. 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 | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
XXL ASA vs. Elkem ASA
Performance |
| Timeline |
| XXL ASA |
| Elkem ASA |
XXL ASA and Elkem ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with XXL ASA and Elkem ASA
The main advantage of trading using opposite XXL ASA and Elkem ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XXL ASA 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.The idea behind XXL ASA and Elkem ASA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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