Correlation Between OMX Copenhagen and HH International

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

Diversification Opportunities for OMX Copenhagen and HH International

0.01

Correlation Coefficient

OMX Copenhagen  HH International

Significant diversification

The 3 months correlation between OMX and HH International is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding OMX Copenhagen All and HH International AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HH International 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 HH International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HH International has no effect on the direction of OMX Copenhagen i.e., OMX Copenhagen and HH International go up and down completely randomly.

Pair Corralation between OMX Copenhagen and HH International

Assuming the 90 days trading horizon OMX Copenhagen All is expected to under-perform the HH International. But the index apears to be less risky and, when comparing its historical volatility, OMX Copenhagen All is 1.63 times less risky than HH International. The index trades about -0.1 of its potential returns per unit of risk. The HH International AS is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  7,800  in HH International AS on December 10, 2024 and sell it today you would earn a total of  2,920  from holding HH International AS or generate 37.44% return on investment over 90 days.

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

OMX Copenhagen All  vs.  HH International AS

Pair Trading with OMX Copenhagen and HH International

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

The idea behind OMX Copenhagen All and HH International 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.