Correlation Between OMX Stockholm and Flexion Mobile

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

Diversification Opportunities for OMX Stockholm and Flexion Mobile

0.48

Correlation Coefficient

OMX Stockholm  Flexion Mobile

Very weak diversification

The 3 months correlation between OMX and Flexion is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding OMX Stockholm Mid and Flexion Mobile PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flexion Mobile PLC 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 Flexion Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flexion Mobile PLC has no effect on the direction of OMX Stockholm i.e., OMX Stockholm and Flexion Mobile go up and down completely randomly.

Pair Corralation between OMX Stockholm and Flexion Mobile

Assuming the 90 days trading horizon OMX Stockholm is expected to generate 10.05 times less return on investment than Flexion Mobile. But when comparing it to its historical volatility, OMX Stockholm Mid is 3.15 times less risky than Flexion Mobile. It trades about 0.05 of its potential returns per unit of risk. Flexion Mobile PLC is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  700.00  in Flexion Mobile PLC on September 24, 2024 and sell it today you would earn a total of  50.00  from holding Flexion Mobile PLC or generate 7.14% return on investment over 90 days.

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

OMX Stockholm Mid  vs.  Flexion Mobile PLC

Pair Trading with OMX Stockholm and Flexion Mobile

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

The idea behind OMX Stockholm Mid and Flexion Mobile PLC 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.