Correlation Between Aker Carbon and REC Silicon

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

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

Diversification Opportunities for Aker Carbon and REC Silicon

0.57

Correlation Coefficient

Aker Carbon  REC Silicon

Very weak diversification

The 3 months correlation between Aker and REC is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Aker Carbon Capture and REC Silicon ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REC Silicon ASA and Aker Carbon 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 Aker Carbon Capture are associated (or correlated) with REC Silicon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REC Silicon ASA has no effect on the direction of Aker Carbon i.e., Aker Carbon and REC Silicon go up and down completely randomly.

Pair Corralation between Aker Carbon and REC Silicon

Assuming the 90 days trading horizon Aker Carbon Capture is expected to generate 0.25 times more return on investment than REC Silicon. However, Aker Carbon Capture is 3.94 times less risky than REC Silicon. It trades about -0.01 of its potential returns per unit of risk. REC Silicon ASA is currently generating about -0.05 per unit of risk. If you would invest  617.00  in Aker Carbon Capture on September 2, 2024 and sell it today you would lose (20.00) from holding Aker Carbon Capture or give up 3.24% of portfolio value over 90 days.

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

Aker Carbon Capture  vs.  REC Silicon ASA

Aker Carbon Capture

Risk-Adjusted Performance

0 of 100

Very Weak

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

REC Silicon ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days REC Silicon ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Aker Carbon and REC Silicon

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

The idea behind Aker Carbon Capture and REC Silicon 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.