Correlation Between Salmon Evolution and Mowi ASA

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

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

Diversification Opportunities for Salmon Evolution and Mowi ASA

0.55

Correlation Coefficient

Salmon Evolution  Mowi ASA

Very weak diversification

The 3 months correlation between Salmon and Mowi is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Salmon Evolution Holding and Mowi ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mowi ASA and Salmon Evolution 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 Salmon Evolution Holding are associated (or correlated) with Mowi ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mowi ASA has no effect on the direction of Salmon Evolution i.e., Salmon Evolution and Mowi ASA go up and down completely randomly.

Pair Corralation between Salmon Evolution and Mowi ASA

Assuming the 90 days trading horizon Salmon Evolution Holding is expected to under-perform the Mowi ASA. In addition to that, Salmon Evolution is 1.06 times more volatile than Mowi ASA. It trades about -0.06 of its total potential returns per unit of risk. Mowi ASA is currently generating about 0.01 per unit of volatility. If you would invest  19,295  in Mowi ASA on December 30, 2024 and sell it today you would earn a total of  15.00  from holding Mowi ASA or generate 0.08% return on investment over 90 days.

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

Salmon Evolution Holding  vs.  Mowi ASA

Salmon Evolution Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Salmon Evolution Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Salmon Evolution is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Mowi ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mowi ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Mowi 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 Salmon Evolution and Mowi ASA

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

The idea behind Salmon Evolution Holding and Mowi 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.