Correlation Between Icelandic Salmon and Atlantic Sapphire

Can any of the company-specific risk be diversified away by investing in both Icelandic Salmon and Atlantic Sapphire 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 Atlantic Sapphire 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 Atlantic Sapphire As, you can compare the effects of market volatilities on Icelandic Salmon and Atlantic Sapphire 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 Atlantic Sapphire. Check out your portfolio center. Please also check ongoing floating volatility patterns of Icelandic Salmon and Atlantic Sapphire.

Diversification Opportunities for Icelandic Salmon and Atlantic Sapphire

-0.42

Correlation Coefficient

Icelandic Salmon  Atlantic Sapphire

Very good diversification

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

Pair Corralation between Icelandic Salmon and Atlantic Sapphire

Assuming the 90 days trading horizon Icelandic Salmon As is expected to generate 0.09 times more return on investment than Atlantic Sapphire. However, Icelandic Salmon As is 11.36 times less risky than Atlantic Sapphire. It trades about 0.06 of its potential returns per unit of risk. Atlantic Sapphire As is currently generating about 0.0 per unit of risk. If you would invest  11,000  in Icelandic Salmon As on August 30, 2024 and sell it today you would earn a total of  900.00  from holding Icelandic Salmon As or generate 8.18% return on investment over 90 days.

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

Icelandic Salmon As  vs.  Atlantic Sapphire As

Icelandic Salmon

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Icelandic Salmon As are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Icelandic Salmon may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Atlantic Sapphire

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Atlantic Sapphire As has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Atlantic Sapphire is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Icelandic Salmon and Atlantic Sapphire

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

The idea behind Icelandic Salmon As and Atlantic Sapphire 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.