Correlation Between SalMar ASA and PF Bakkafrost

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

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

Diversification Opportunities for SalMar ASA and PF Bakkafrost

0.33

Correlation Coefficient

SalMar ASA  PF Bakkafrost

Weak diversification

The 3 months correlation between SalMar and 6BF is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding SalMar ASA and PF Bakkafrost in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PF Bakkafrost and SalMar 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 SalMar ASA are associated (or correlated) with PF Bakkafrost. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PF Bakkafrost has no effect on the direction of SalMar ASA i.e., SalMar ASA and PF Bakkafrost go up and down completely randomly.

Pair Corralation between SalMar ASA and PF Bakkafrost

Assuming the 90 days horizon SalMar ASA is expected to generate 1.64 times more return on investment than PF Bakkafrost. However, SalMar ASA is 1.64 times more volatile than PF Bakkafrost. It trades about 0.05 of its potential returns per unit of risk. PF Bakkafrost is currently generating about 0.05 per unit of risk. If you would invest  1,959  in SalMar ASA on October 12, 2024 and sell it today you would earn a total of  2,621  from holding SalMar ASA or generate 133.79% return on investment over 90 days.

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

SalMar ASA  vs.  PF Bakkafrost

SalMar ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SalMar ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SalMar ASA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

PF Bakkafrost

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PF Bakkafrost has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PF Bakkafrost is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SalMar ASA and PF Bakkafrost

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

The idea behind SalMar ASA and PF Bakkafrost 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.