Correlation Between SalMar ASA and Telenor ASA

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

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

Diversification Opportunities for SalMar ASA and Telenor ASA

-0.36

Correlation Coefficient

SalMar ASA  Telenor ASA

Very good diversification

The 3 months correlation between SalMar and Telenor is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding SalMar ASA and Telenor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telenor ASA 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 Telenor ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telenor ASA has no effect on the direction of SalMar ASA i.e., SalMar ASA and Telenor ASA go up and down completely randomly.

Pair Corralation between SalMar ASA and Telenor ASA

Assuming the 90 days trading horizon SalMar ASA is expected to generate 1.38 times more return on investment than Telenor ASA. However, SalMar ASA is 1.38 times more volatile than Telenor ASA. It trades about 0.07 of its potential returns per unit of risk. Telenor ASA is currently generating about -0.06 per unit of risk. If you would invest  55,400  in SalMar ASA on September 12, 2024 and sell it today you would earn a total of  3,450  from holding SalMar ASA or generate 6.23% return on investment over 90 days.

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

SalMar ASA  vs.  Telenor ASA

SalMar ASA

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SalMar ASA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, SalMar ASA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Telenor ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telenor ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Telenor ASA is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with SalMar ASA and Telenor ASA

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

The idea behind SalMar ASA and Telenor 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.