Correlation Between OMX Copenhagen and Green Hydrogen

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

Diversification Opportunities for OMX Copenhagen and Green Hydrogen

0.24

Correlation Coefficient

OMX Copenhagen  Green Hydrogen

Modest diversification

The 3 months correlation between OMX and Green is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding OMX Copenhagen All and Green Hydrogen Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Hydrogen Systems 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 Green Hydrogen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Hydrogen Systems has no effect on the direction of OMX Copenhagen i.e., OMX Copenhagen and Green Hydrogen go up and down completely randomly.

Pair Corralation between OMX Copenhagen and Green Hydrogen

Assuming the 90 days trading horizon OMX Copenhagen All is expected to generate 0.21 times more return on investment than Green Hydrogen. However, OMX Copenhagen All is 4.76 times less risky than Green Hydrogen. It trades about 0.04 of its potential returns per unit of risk. Green Hydrogen Systems is currently generating about -0.06 per unit of risk. If you would invest  158,411  in OMX Copenhagen All on December 2, 2024 and sell it today you would earn a total of  2,724  from holding OMX Copenhagen All or generate 1.72% return on investment over 90 days.

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

OMX Copenhagen All  vs.  Green Hydrogen Systems

Pair Trading with OMX Copenhagen and Green Hydrogen

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

The idea behind OMX Copenhagen All and Green Hydrogen Systems 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.