Correlation Between SalMar ASA and Alico

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

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

Diversification Opportunities for SalMar ASA and Alico

0.32

Correlation Coefficient

SalMar ASA  Alico

Weak diversification

The 3 months correlation between SalMar and Alico is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding SalMar ASA and Alico Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alico Inc and SalMar 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 SalMar ASA are associated (or correlated) with Alico. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alico Inc has no effect on the direction of SalMar ASA i.e., SalMar ASA and Alico go up and down completely randomly.

Pair Corralation between SalMar ASA and Alico

Assuming the 90 days horizon SalMar ASA is expected to generate 2.25 times more return on investment than Alico. However, SalMar ASA is 2.25 times more volatile than Alico Inc. It trades about -0.01 of its potential returns per unit of risk. Alico Inc is currently generating about -0.12 per unit of risk. If you would invest  1,222  in SalMar ASA on January 17, 2025 and sell it today you would lose (62.00) from holding SalMar ASA or give up 5.07% of portfolio value over 90 days.

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

SalMar ASA  vs.  Alico Inc

SalMar ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days SalMar ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, SalMar ASA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Alico Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alico Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with SalMar ASA and Alico

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

The idea behind SalMar ASA and Alico Inc 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.