Correlation Between REC Silicon and Polight ASA

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

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

Diversification Opportunities for REC Silicon and Polight ASA

0.52

Correlation Coefficient

REC Silicon  Polight ASA

Very weak diversification

The 3 months correlation between REC and Polight is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding REC Silicon ASA and Polight ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polight ASA and REC Silicon 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 REC Silicon ASA are associated (or correlated) with Polight ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polight ASA has no effect on the direction of REC Silicon i.e., REC Silicon and Polight ASA go up and down completely randomly.

Pair Corralation between REC Silicon and Polight ASA

Assuming the 90 days trading horizon REC Silicon ASA is expected to under-perform the Polight ASA. In addition to that, REC Silicon is 2.14 times more volatile than Polight ASA. It trades about -0.05 of its total potential returns per unit of risk. Polight ASA is currently generating about 0.03 per unit of volatility. If you would invest  400.00  in Polight ASA on August 31, 2024 and sell it today you would earn a total of  16.00  from holding Polight ASA or generate 4.0% return on investment over 90 days.

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

REC Silicon ASA  vs.  Polight ASA

REC Silicon ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days REC Silicon ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Polight ASA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Polight ASA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Polight ASA may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with REC Silicon and Polight ASA

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

The idea behind REC Silicon ASA and Polight 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.