Correlation Between OMX Copenhagen and Ennogie Solar

Can any of the company-specific risk be diversified away by investing in both OMX Copenhagen and Ennogie Solar 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 Ennogie Solar 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 Ennogie Solar Group, you can compare the effects of market volatilities on OMX Copenhagen and Ennogie Solar 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 Ennogie Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of OMX Copenhagen and Ennogie Solar.

Diversification Opportunities for OMX Copenhagen and Ennogie Solar

0.44

Correlation Coefficient

OMX Copenhagen  Ennogie Solar

Very weak diversification

The 3 months correlation between OMX and Ennogie is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding OMX Copenhagen All and Ennogie Solar Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ennogie Solar Group 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 Ennogie Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ennogie Solar Group has no effect on the direction of OMX Copenhagen i.e., OMX Copenhagen and Ennogie Solar go up and down completely randomly.

Pair Corralation between OMX Copenhagen and Ennogie Solar

Assuming the 90 days trading horizon OMX Copenhagen All is expected to generate 0.31 times more return on investment than Ennogie Solar. However, OMX Copenhagen All is 3.23 times less risky than Ennogie Solar. It trades about -0.13 of its potential returns per unit of risk. Ennogie Solar Group is currently generating about -0.13 per unit of risk. If you would invest  155,319  in OMX Copenhagen All on December 30, 2024 and sell it today you would lose (17,834) from holding OMX Copenhagen All or give up 11.48% of portfolio value over 90 days.

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

OMX Copenhagen All  vs.  Ennogie Solar Group

Pair Trading with OMX Copenhagen and Ennogie Solar

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

The idea behind OMX Copenhagen All and Ennogie Solar Group 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.