Correlation Between OMX Stockholm and Alpcot Holding

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

Diversification Opportunities for OMX Stockholm and Alpcot Holding

0.32

Correlation Coefficient

OMX Stockholm  Alpcot Holding

Weak diversification

The 3 months correlation between OMX and Alpcot is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding OMX Stockholm Mid and Alpcot Holding AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpcot Holding AB 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 Alpcot Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpcot Holding AB has no effect on the direction of OMX Stockholm i.e., OMX Stockholm and Alpcot Holding go up and down completely randomly.

Pair Corralation between OMX Stockholm and Alpcot Holding

Assuming the 90 days trading horizon OMX Stockholm is expected to generate 2.02 times less return on investment than Alpcot Holding. But when comparing it to its historical volatility, OMX Stockholm Mid is 6.24 times less risky than Alpcot Holding. It trades about 0.06 of its potential returns per unit of risk. Alpcot Holding AB is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  60.00  in Alpcot Holding AB on September 26, 2024 and sell it today you would earn a total of  0.00  from holding Alpcot Holding AB or generate 0.0% return on investment over 90 days.

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

OMX Stockholm Mid  vs.  Alpcot Holding AB

Pair Trading with OMX Stockholm and Alpcot Holding

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

The idea behind OMX Stockholm Mid and Alpcot Holding AB 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.