Correlation Between Elkem ASA and Akva

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

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

Diversification Opportunities for Elkem ASA and Akva

-0.6

Correlation Coefficient

Elkem ASA  Akva

Excellent diversification

The 3 months correlation between Elkem and Akva is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Elkem ASA and Akva Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Akva Group and Elkem 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 Elkem ASA are associated (or correlated) with Akva. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Akva Group has no effect on the direction of Elkem ASA i.e., Elkem ASA and Akva go up and down completely randomly.

Pair Corralation between Elkem ASA and Akva

Assuming the 90 days trading horizon Elkem ASA is expected to under-perform the Akva. In addition to that, Elkem ASA is 1.02 times more volatile than Akva Group. It trades about -0.05 of its total potential returns per unit of risk. Akva Group is currently generating about 0.13 per unit of volatility. If you would invest  5,820  in Akva Group on September 26, 2024 and sell it today you would earn a total of  920.00  from holding Akva Group or generate 15.81% return on investment over 90 days.

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

Elkem ASA  vs.  Akva Group

Elkem ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elkem ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Akva Group

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Akva Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Akva disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Elkem ASA and Akva

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

The idea behind Elkem ASA and Akva Group 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.