Correlation Between OMX Copenhagen and Cemat AS

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

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

Diversification Opportunities for OMX Copenhagen and Cemat AS

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Correlation Coefficient

OMX Copenhagen  Cemat AS

Pay attention - limited upside

The 3 months correlation between OMX and Cemat is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding OMX Copenhagen All and Cemat AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cemat AS and OMX Copenhagen 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 OMX Copenhagen All are associated (or correlated) with Cemat AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cemat AS has no effect on the direction of OMX Copenhagen i.e., OMX Copenhagen and Cemat AS go up and down completely randomly.

Pair Corralation between OMX Copenhagen and Cemat AS

Assuming the 90 days trading horizon OMX Copenhagen All is expected to under-perform the Cemat AS. In addition to that, OMX Copenhagen is 1.84 times more volatile than Cemat AS. It trades about -0.18 of its total potential returns per unit of risk. Cemat AS is currently generating about -0.06 per unit of volatility. If you would invest  105.00  in Cemat AS on October 5, 2024 and sell it today you would lose (2.00) from holding Cemat AS or give up 1.9% of portfolio value over 90 days.

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

OMX Copenhagen All  vs.  Cemat AS

Pair Trading with OMX Copenhagen and Cemat AS

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

The idea behind OMX Copenhagen All and Cemat AS 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.