Correlation Between OMX Stockholm and PolyPlank Publ

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

Diversification Opportunities for OMX Stockholm and PolyPlank Publ

0.4

Correlation Coefficient

OMX Stockholm  PolyPlank Publ

Very weak diversification

The 3 months correlation between OMX and PolyPlank is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding OMX Stockholm Mid and PolyPlank publ AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PolyPlank publ 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 PolyPlank Publ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PolyPlank publ AB has no effect on the direction of OMX Stockholm i.e., OMX Stockholm and PolyPlank Publ go up and down completely randomly.

Pair Corralation between OMX Stockholm and PolyPlank Publ

Assuming the 90 days trading horizon OMX Stockholm Mid is expected to generate 0.09 times more return on investment than PolyPlank Publ. However, OMX Stockholm Mid is 11.23 times less risky than PolyPlank Publ. It trades about 0.08 of its potential returns per unit of risk. PolyPlank publ AB is currently generating about -0.1 per unit of risk. If you would invest  161,715  in OMX Stockholm Mid on September 23, 2024 and sell it today you would earn a total of  1,808  from holding OMX Stockholm Mid or generate 1.12% 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.  PolyPlank publ AB

Pair Trading with OMX Stockholm and PolyPlank Publ

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

The idea behind OMX Stockholm Mid and PolyPlank publ 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.