Correlation Between Sprott Focus and SalMar ASA

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

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

Diversification Opportunities for Sprott Focus and SalMar ASA

0.61

Correlation Coefficient

Sprott Focus  SalMar ASA

Poor diversification

The 3 months correlation between Sprott and SalMar is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Focus Trust and SalMar ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SalMar ASA and Sprott Focus 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 Sprott Focus Trust 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 Sprott Focus i.e., Sprott Focus and SalMar ASA go up and down completely randomly.

Pair Corralation between Sprott Focus and SalMar ASA

Given the investment horizon of 90 days Sprott Focus is expected to generate 4.65 times less return on investment than SalMar ASA. But when comparing it to its historical volatility, Sprott Focus Trust is 3.92 times less risky than SalMar ASA. It trades about 0.06 of its potential returns per unit of risk. SalMar ASA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,127  in SalMar ASA on December 26, 2024 and sell it today you would earn a total of  132.00  from holding SalMar ASA or generate 11.71% return on investment over 90 days.

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

Sprott Focus Trust  vs.  SalMar ASA

Sprott Focus Trust

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Focus Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Sprott Focus is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

SalMar ASA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SalMar ASA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SalMar ASA showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sprott Focus and SalMar ASA

The main advantage of trading using opposite Sprott Focus and SalMar ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sprott Focus 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 Sprott Focus Trust 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.