Correlation Between Elkem ASA and Zaptec AS

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

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

Diversification Opportunities for Elkem ASA and Zaptec AS

0.81

Correlation Coefficient

Elkem ASA  Zaptec AS

Very poor diversification

The 3 months correlation between Elkem and Zaptec is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Elkem ASA and Zaptec AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zaptec 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 Zaptec AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zaptec AS has no effect on the direction of Elkem ASA i.e., Elkem ASA and Zaptec AS go up and down completely randomly.

Pair Corralation between Elkem ASA and Zaptec AS

Assuming the 90 days trading horizon Elkem ASA is expected to generate 2.75 times less return on investment than Zaptec AS. But when comparing it to its historical volatility, Elkem ASA is 1.47 times less risky than Zaptec AS. It trades about 0.13 of its potential returns per unit of risk. Zaptec AS is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  961.00  in Zaptec AS on November 29, 2024 and sell it today you would earn a total of  939.00  from holding Zaptec AS or generate 97.71% return on investment over 90 days.

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

Elkem ASA  vs.  Zaptec AS

Elkem ASA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Elkem ASA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Elkem ASA disclosed solid returns over the last few months and may actually be approaching a breakup point.

Zaptec AS

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Zaptec AS are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Zaptec AS disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Elkem ASA and Zaptec AS

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

The idea behind Elkem ASA and Zaptec 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.