Correlation Between Elkem ASA and Nordhealth

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

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

Diversification Opportunities for Elkem ASA and Nordhealth

-0.42

Correlation Coefficient

Elkem ASA  Nordhealth

Very good diversification

The 3 months correlation between Elkem and Nordhealth is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Elkem ASA and Nordhealth AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordhealth AS and Elkem 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 Elkem ASA are associated (or correlated) with Nordhealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordhealth AS has no effect on the direction of Elkem ASA i.e., Elkem ASA and Nordhealth go up and down completely randomly.

Pair Corralation between Elkem ASA and Nordhealth

Assuming the 90 days trading horizon Elkem ASA is expected to under-perform the Nordhealth. But the stock apears to be less risky and, when comparing its historical volatility, Elkem ASA is 2.22 times less risky than Nordhealth. The stock trades about -0.05 of its potential returns per unit of risk. The Nordhealth AS is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,580  in Nordhealth AS on October 20, 2024 and sell it today you would earn a total of  1,760  from holding Nordhealth AS or generate 68.22% return on investment over 90 days.

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

Elkem ASA  vs.  Nordhealth AS

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.

Nordhealth AS

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nordhealth AS are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Nordhealth displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Elkem ASA and Nordhealth

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

The idea behind Elkem ASA and Nordhealth 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 Anywhere module to track or share privately all of your investments from the convenience of any device.