Correlation Between Forafric Global and SalMar ASA

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

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

Diversification Opportunities for Forafric Global and SalMar ASA

0.44

Correlation Coefficient

Forafric Global  SalMar ASA

Very weak diversification

The 3 months correlation between Forafric and SalMar is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Forafric Global PLC and SalMar ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SalMar ASA and Forafric Global 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 Forafric Global PLC are associated (or correlated) with SalMar ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SalMar ASA has no effect on the direction of Forafric Global i.e., Forafric Global and SalMar ASA go up and down completely randomly.

Pair Corralation between Forafric Global and SalMar ASA

Assuming the 90 days horizon Forafric Global PLC is expected to under-perform the SalMar ASA. In addition to that, Forafric Global is 2.09 times more volatile than SalMar ASA. It trades about -0.07 of its total potential returns per unit of risk. SalMar ASA is currently generating about 0.05 per unit of volatility. If you would invest  1,192  in SalMar ASA on October 25, 2024 and sell it today you would earn a total of  23.00  from holding SalMar ASA or generate 1.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	77.78%
Values	Daily Returns

Forafric Global PLC  vs.  SalMar ASA

Forafric Global PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Forafric Global PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, Forafric Global is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

SalMar ASA

Risk-Adjusted Performance

0 of 100

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.

Pair Trading with Forafric Global and SalMar ASA

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

The idea behind Forafric Global PLC and SalMar 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.