Correlation Between SalMar ASA and Forafric Global

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

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

Diversification Opportunities for SalMar ASA and Forafric Global

0.22

Correlation Coefficient

SalMar ASA  Forafric Global

Modest diversification

The 3 months correlation between SalMar and Forafric is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding SalMar ASA and Forafric Global PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forafric Global PLC 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 Forafric Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forafric Global PLC has no effect on the direction of SalMar ASA i.e., SalMar ASA and Forafric Global go up and down completely randomly.

Pair Corralation between SalMar ASA and Forafric Global

Assuming the 90 days horizon SalMar ASA is expected to generate 0.53 times more return on investment than Forafric Global. However, SalMar ASA is 1.88 times less risky than Forafric Global. It trades about -0.03 of its potential returns per unit of risk. Forafric Global PLC is currently generating about -0.02 per unit of risk. If you would invest  1,225  in SalMar ASA on October 10, 2024 and sell it today you would lose (74.00) from holding SalMar ASA or give up 6.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	82.5%
Values	Daily Returns

SalMar ASA  vs.  Forafric Global PLC

SalMar ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SalMar ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Forafric Global PLC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Forafric Global PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent forward indicators, Forafric Global may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SalMar ASA and Forafric Global

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

The idea behind SalMar ASA and Forafric Global PLC 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.