Correlation Between Nordic Mining and Elkem ASA

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

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

Diversification Opportunities for Nordic Mining and Elkem ASA

-0.38

Correlation Coefficient

Nordic Mining  Elkem ASA

Very good diversification

The 3 months correlation between Nordic and Elkem is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Mining ASA and Elkem ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elkem ASA and Nordic Mining 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 Nordic Mining ASA are associated (or correlated) with Elkem ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elkem ASA has no effect on the direction of Nordic Mining i.e., Nordic Mining and Elkem ASA go up and down completely randomly.

Pair Corralation between Nordic Mining and Elkem ASA

Assuming the 90 days trading horizon Nordic Mining ASA is expected to under-perform the Elkem ASA. But the stock apears to be less risky and, when comparing its historical volatility, Nordic Mining ASA is 1.58 times less risky than Elkem ASA. The stock trades about -0.14 of its potential returns per unit of risk. The Elkem ASA is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,752  in Elkem ASA on December 30, 2024 and sell it today you would earn a total of  398.00  from holding Elkem ASA or generate 22.72% return on investment over 90 days.

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

Nordic Mining ASA  vs.  Elkem ASA

Nordic Mining ASA

Risk-Adjusted Performance

Very Weak

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

Elkem ASA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Elkem ASA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Elkem ASA disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nordic Mining and Elkem ASA

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

The idea behind Nordic Mining ASA and Elkem 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.