Correlation Between Everfuel and REC Silicon

Can any of the company-specific risk be diversified away by investing in both Everfuel and REC Silicon 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 Everfuel and REC Silicon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Everfuel AS and REC Silicon ASA, you can compare the effects of market volatilities on Everfuel and REC Silicon 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 Everfuel with a short position of REC Silicon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Everfuel and REC Silicon.

Diversification Opportunities for Everfuel and REC Silicon

0.18

Correlation Coefficient

Everfuel  REC Silicon

Average diversification

The 3 months correlation between Everfuel and REC is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Everfuel AS and REC Silicon ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REC Silicon ASA and Everfuel 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 Everfuel AS are associated (or correlated) with REC Silicon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REC Silicon ASA has no effect on the direction of Everfuel i.e., Everfuel and REC Silicon go up and down completely randomly.

Pair Corralation between Everfuel and REC Silicon

Assuming the 90 days trading horizon Everfuel AS is expected to generate 0.11 times more return on investment than REC Silicon. However, Everfuel AS is 8.82 times less risky than REC Silicon. It trades about 0.01 of its potential returns per unit of risk. REC Silicon ASA is currently generating about -0.03 per unit of risk. If you would invest  1,286  in Everfuel AS on September 14, 2024 and sell it today you would earn a total of  6.00  from holding Everfuel AS or generate 0.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Everfuel AS  vs.  REC Silicon ASA

Everfuel AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Everfuel AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Everfuel is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

REC Silicon ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days REC Silicon ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Everfuel and REC Silicon

The main advantage of trading using opposite Everfuel and REC Silicon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Everfuel position performs unexpectedly, REC Silicon 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 REC Silicon will offset losses from the drop in REC Silicon's long position.

The idea behind Everfuel AS and REC Silicon 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.

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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.