Correlation Between Lgerin Egill and Icelandic Salmon

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

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

Diversification Opportunities for Lgerin Egill and Icelandic Salmon

0.54

Correlation Coefficient

Lgerin Egill  Icelandic Salmon

Very weak diversification

The 3 months correlation between Lgerin and Icelandic is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding lgerin Egill Skallagrmsson and Icelandic Salmon AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icelandic Salmon and Lgerin Egill 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 lgerin Egill Skallagrmsson are associated (or correlated) with Icelandic Salmon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icelandic Salmon has no effect on the direction of Lgerin Egill i.e., Lgerin Egill and Icelandic Salmon go up and down completely randomly.

Pair Corralation between Lgerin Egill and Icelandic Salmon

Assuming the 90 days trading horizon Lgerin Egill is expected to generate 1.21 times less return on investment than Icelandic Salmon. In addition to that, Lgerin Egill is 1.06 times more volatile than Icelandic Salmon AS. It trades about 0.08 of its total potential returns per unit of risk. Icelandic Salmon AS is currently generating about 0.1 per unit of volatility. If you would invest  138,000  in Icelandic Salmon AS on September 13, 2024 and sell it today you would earn a total of  13,000  from holding Icelandic Salmon AS or generate 9.42% return on investment over 90 days.

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

lgerin Egill Skallagrmsson  vs.  Icelandic Salmon AS

lgerin Egill Skallag

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in lgerin Egill Skallagrmsson are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady technical and fundamental indicators, Lgerin Egill may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Lgerin Egill and Icelandic Salmon

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

The idea behind lgerin Egill Skallagrmsson and Icelandic Salmon 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..