Correlation Between SalMar ASA and Sprott Focus

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

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

Diversification Opportunities for SalMar ASA and Sprott Focus

-0.12

Correlation Coefficient

SalMar ASA  Sprott Focus

Good diversification

The 3 months correlation between SalMar and Sprott is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding SalMar ASA and Sprott Focus Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Focus Trust 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 Sprott Focus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Focus Trust has no effect on the direction of SalMar ASA i.e., SalMar ASA and Sprott Focus go up and down completely randomly.

Pair Corralation between SalMar ASA and Sprott Focus

Assuming the 90 days horizon SalMar ASA is expected to generate 14.94 times less return on investment than Sprott Focus. In addition to that, SalMar ASA is 4.08 times more volatile than Sprott Focus Trust. It trades about 0.0 of its total potential returns per unit of risk. Sprott Focus Trust is currently generating about 0.18 per unit of volatility. If you would invest  749.00  in Sprott Focus Trust on September 13, 2024 and sell it today you would earn a total of  67.00  from holding Sprott Focus Trust or generate 8.95% 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.  Sprott Focus Trust

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 fairly strong basic indicators, SalMar ASA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sprott Focus Trust

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Focus Trust are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Sprott Focus may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SalMar ASA and Sprott Focus

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

The idea behind SalMar ASA and Sprott Focus Trust 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.