Correlation Between ARCTIC HIGH and Elkem ASA

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

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

Diversification Opportunities for ARCTIC HIGH and Elkem ASA

-0.18

Correlation Coefficient

ARCTIC HIGH  Elkem ASA

Good diversification

The 3 months correlation between ARCTIC and Elkem is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding ARCTIC HIGH RETURN and Elkem ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elkem ASA and ARCTIC HIGH 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 ARCTIC HIGH RETURN 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 ARCTIC HIGH i.e., ARCTIC HIGH and Elkem ASA go up and down completely randomly.

Pair Corralation between ARCTIC HIGH and Elkem ASA

Assuming the 90 days trading horizon ARCTIC HIGH is expected to generate 4.64 times less return on investment than Elkem ASA. But when comparing it to its historical volatility, ARCTIC HIGH RETURN is 15.69 times less risky than Elkem ASA. It trades about 0.23 of its potential returns per unit of risk. Elkem ASA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,713  in Elkem ASA on September 18, 2024 and sell it today you would earn a total of  132.00  from holding Elkem ASA or generate 7.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

ARCTIC HIGH RETURN  vs.  Elkem ASA

ARCTIC HIGH RETURN

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ARCTIC HIGH RETURN are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly stable basic indicators, ARCTIC HIGH is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Elkem ASA

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Elkem ASA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Elkem ASA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ARCTIC HIGH and Elkem ASA

The main advantage of trading using opposite ARCTIC HIGH and Elkem ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARCTIC HIGH 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 ARCTIC HIGH RETURN 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.

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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.