Correlation Between OMX Stockholm and Adventure Box

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

By analyzing existing cross correlation between OMX Stockholm Mid and Adventure Box Technology, you can compare the effects of market volatilities on OMX Stockholm and Adventure Box 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 Stockholm with a short position of Adventure Box. Check out your portfolio center. Please also check ongoing floating volatility patterns of OMX Stockholm and Adventure Box.

Diversification Opportunities for OMX Stockholm and Adventure Box

-0.64

Correlation Coefficient

OMX Stockholm  Adventure Box

Excellent diversification

The 3 months correlation between OMX and Adventure is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding OMX Stockholm Mid and Adventure Box Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adventure Box Technology and OMX Stockholm 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 Stockholm Mid are associated (or correlated) with Adventure Box. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adventure Box Technology has no effect on the direction of OMX Stockholm i.e., OMX Stockholm and Adventure Box go up and down completely randomly.

Pair Corralation between OMX Stockholm and Adventure Box

Assuming the 90 days trading horizon OMX Stockholm Mid is expected to generate 0.09 times more return on investment than Adventure Box. However, OMX Stockholm Mid is 11.6 times less risky than Adventure Box. It trades about 0.08 of its potential returns per unit of risk. Adventure Box Technology is currently generating about -0.11 per unit of risk. If you would invest  164,909  in OMX Stockholm Mid on December 3, 2024 and sell it today you would earn a total of  6,180  from holding OMX Stockholm Mid or generate 3.75% return on investment over 90 days.

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

OMX Stockholm Mid  vs.  Adventure Box Technology

Pair Trading with OMX Stockholm and Adventure Box

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

The idea behind OMX Stockholm Mid and Adventure Box Technology 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.