Correlation Between Icelandic Salmon and Atlantic Sapphire

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

By analyzing existing cross correlation between Icelandic Salmon As and Atlantic Sapphire As, you can compare the effects of market volatilities on Icelandic Salmon and Atlantic Sapphire 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 Icelandic Salmon with a short position of Atlantic Sapphire. Check out your portfolio center. Please also check ongoing floating volatility patterns of Icelandic Salmon and Atlantic Sapphire.

Diversification Opportunities for Icelandic Salmon and Atlantic Sapphire

-0.82

Correlation Coefficient

Icelandic Salmon  Atlantic Sapphire

Pay attention - limited upside

The 3 months correlation between Icelandic and Atlantic is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Icelandic Salmon As and Atlantic Sapphire As in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlantic Sapphire and Icelandic Salmon 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 Icelandic Salmon As are associated (or correlated) with Atlantic Sapphire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlantic Sapphire has no effect on the direction of Icelandic Salmon i.e., Icelandic Salmon and Atlantic Sapphire go up and down completely randomly.

Pair Corralation between Icelandic Salmon and Atlantic Sapphire

Assuming the 90 days trading horizon Icelandic Salmon is expected to generate 9.16 times less return on investment than Atlantic Sapphire. But when comparing it to its historical volatility, Icelandic Salmon As is 10.77 times less risky than Atlantic Sapphire. It trades about 0.09 of its potential returns per unit of risk. Atlantic Sapphire As is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Atlantic Sapphire As on September 14, 2024 and sell it today you would earn a total of  0.00  from holding Atlantic Sapphire As or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Icelandic Salmon As  vs.  Atlantic Sapphire As

Icelandic Salmon

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Icelandic Salmon As are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Icelandic Salmon may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Atlantic Sapphire

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Atlantic Sapphire As are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Atlantic Sapphire disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Icelandic Salmon and Atlantic Sapphire

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

The idea behind Icelandic Salmon As and Atlantic Sapphire As 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.