Correlation Between OMX Stockholm and Lipigon Pharmaceuticals

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

Diversification Opportunities for OMX Stockholm and Lipigon Pharmaceuticals

-0.12

Correlation Coefficient

OMX Stockholm  Lipigon Pharmaceuticals

Good diversification

The 3 months correlation between OMX and Lipigon is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding OMX Stockholm Mid and Lipigon Pharmaceuticals AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lipigon Pharmaceuticals 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 Lipigon Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lipigon Pharmaceuticals has no effect on the direction of OMX Stockholm i.e., OMX Stockholm and Lipigon Pharmaceuticals go up and down completely randomly.

Pair Corralation between OMX Stockholm and Lipigon Pharmaceuticals

Assuming the 90 days trading horizon OMX Stockholm Mid is expected to under-perform the Lipigon Pharmaceuticals. But the index apears to be less risky and, when comparing its historical volatility, OMX Stockholm Mid is 13.85 times less risky than Lipigon Pharmaceuticals. The index trades about -0.04 of its potential returns per unit of risk. The Lipigon Pharmaceuticals AB is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Lipigon Pharmaceuticals AB on December 29, 2024 and sell it today you would earn a total of  1.00  from holding Lipigon Pharmaceuticals AB or generate 8.33% return on investment over 90 days.

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

OMX Stockholm Mid  vs.  Lipigon Pharmaceuticals AB

Pair Trading with OMX Stockholm and Lipigon Pharmaceuticals

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

The idea behind OMX Stockholm Mid and Lipigon Pharmaceuticals 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 CEOs Directory module to screen CEOs from public companies around the world.