Correlation Between Eqva ASA and Elkem ASA

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

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

Diversification Opportunities for Eqva ASA and Elkem ASA

-0.29

Correlation Coefficient

Eqva ASA  Elkem ASA

Very good diversification

The 3 months correlation between Eqva and Elkem is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Eqva ASA and Elkem ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elkem ASA and Eqva 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 Eqva ASA 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 Eqva ASA i.e., Eqva ASA and Elkem ASA go up and down completely randomly.

Pair Corralation between Eqva ASA and Elkem ASA

Assuming the 90 days trading horizon Eqva ASA is expected to generate 2.07 times more return on investment than Elkem ASA. However, Eqva ASA is 2.07 times more volatile than Elkem ASA. It trades about 0.06 of its potential returns per unit of risk. Elkem ASA is currently generating about -0.08 per unit of risk. If you would invest  472.00  in Eqva ASA on August 26, 2024 and sell it today you would earn a total of  16.00  from holding Eqva ASA or generate 3.39% return on investment over 90 days.

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

Eqva ASA  vs.  Elkem ASA

Eqva ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eqva ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Eqva ASA is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

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.

Pair Trading with Eqva ASA and Elkem ASA

The main advantage of trading using opposite Eqva ASA and Elkem ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eqva ASA 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 Eqva ASA 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.