Correlation Between Elkem ASA and Skue Sparebank

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

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

Diversification Opportunities for Elkem ASA and Skue Sparebank

-0.42

Correlation Coefficient

Elkem ASA  Skue Sparebank

Very good diversification

The 3 months correlation between Elkem and Skue is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Elkem ASA and Skue Sparebank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skue Sparebank 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 Skue Sparebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skue Sparebank has no effect on the direction of Elkem ASA i.e., Elkem ASA and Skue Sparebank go up and down completely randomly.

Pair Corralation between Elkem ASA and Skue Sparebank

Assuming the 90 days trading horizon Elkem ASA is expected to under-perform the Skue Sparebank. In addition to that, Elkem ASA is 1.94 times more volatile than Skue Sparebank. It trades about 0.0 of its total potential returns per unit of risk. Skue Sparebank is currently generating about 0.18 per unit of volatility. If you would invest  24,800  in Skue Sparebank on September 21, 2024 and sell it today you would earn a total of  3,190  from holding Skue Sparebank or generate 12.86% return on investment over 90 days.

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

Elkem ASA  vs.  Skue Sparebank

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 quite persistent forward-looking signals, Elkem ASA is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Skue Sparebank

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Skue Sparebank are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Skue Sparebank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Elkem ASA and Skue Sparebank

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

The idea behind Elkem ASA and Skue Sparebank 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.