Correlation Between Icelandic Salmon and Marel Hf

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

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

Diversification Opportunities for Icelandic Salmon and Marel Hf

0.88

Correlation Coefficient

Icelandic Salmon  Marel Hf

Very poor diversification

The 3 months correlation between Icelandic and Marel is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Icelandic Salmon AS and Marel hf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marel hf and Icelandic Salmon 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 Icelandic Salmon AS are associated (or correlated) with Marel Hf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marel hf has no effect on the direction of Icelandic Salmon i.e., Icelandic Salmon and Marel Hf go up and down completely randomly.

Pair Corralation between Icelandic Salmon and Marel Hf

Assuming the 90 days trading horizon Icelandic Salmon is expected to generate 2.53 times less return on investment than Marel Hf. In addition to that, Icelandic Salmon is 1.17 times more volatile than Marel hf. It trades about 0.1 of its total potential returns per unit of risk. Marel hf is currently generating about 0.3 per unit of volatility. If you would invest  49,400  in Marel hf on September 13, 2024 and sell it today you would earn a total of  13,400  from holding Marel hf or generate 27.13% return on investment over 90 days.

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

Icelandic Salmon AS  vs.  Marel hf

Icelandic Salmon

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Icelandic Salmon AS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady forward indicators, Icelandic Salmon may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Marel hf

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Marel hf are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady forward indicators, Marel Hf demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Icelandic Salmon and Marel Hf

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

The idea behind Icelandic Salmon AS and Marel hf 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.