Correlation Between Icelandic Salmon and Nordic Aqua

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

Diversification Opportunities for Icelandic Salmon and Nordic Aqua

-0.72

Correlation Coefficient

Icelandic Salmon  Nordic Aqua

Pay attention - limited upside

The 3 months correlation between Icelandic and Nordic is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Icelandic Salmon As and Nordic Aqua Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordic Aqua Partners 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 Nordic Aqua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordic Aqua Partners has no effect on the direction of Icelandic Salmon i.e., Icelandic Salmon and Nordic Aqua go up and down completely randomly.

Pair Corralation between Icelandic Salmon and Nordic Aqua

Assuming the 90 days trading horizon Icelandic Salmon As is expected to generate 1.02 times more return on investment than Nordic Aqua. However, Icelandic Salmon is 1.02 times more volatile than Nordic Aqua Partners. It trades about 0.07 of its potential returns per unit of risk. Nordic Aqua Partners is currently generating about -0.16 per unit of risk. If you would invest  10,800  in Icelandic Salmon As on September 12, 2024 and sell it today you would earn a total of  1,000.00  from holding Icelandic Salmon As or generate 9.26% return on investment over 90 days.

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

Icelandic Salmon As  vs.  Nordic Aqua Partners

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 unfluctuating basic indicators, Icelandic Salmon may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Nordic Aqua Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nordic Aqua Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Icelandic Salmon and Nordic Aqua

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

The idea behind Icelandic Salmon As and Nordic Aqua Partners 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.