Correlation Between OMX Copenhagen and Bactiquant

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

By analyzing existing cross correlation between OMX Copenhagen All and Bactiquant AS, you can compare the effects of market volatilities on OMX Copenhagen and Bactiquant 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 Copenhagen with a short position of Bactiquant. Check out your portfolio center. Please also check ongoing floating volatility patterns of OMX Copenhagen and Bactiquant.

Diversification Opportunities for OMX Copenhagen and Bactiquant

0.58

Correlation Coefficient

OMX Copenhagen

Bactiquant

Very weak diversification

The 3 months correlation between OMX and Bactiquant is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding OMX Copenhagen All and Bactiquant AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bactiquant AS and OMX Copenhagen 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 Copenhagen All are associated (or correlated) with Bactiquant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bactiquant AS has no effect on the direction of OMX Copenhagen i.e., OMX Copenhagen and Bactiquant go up and down completely randomly.

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Pair Corralation between OMX Copenhagen and Bactiquant

Assuming the 90 days trading horizon OMX Copenhagen All is expected to generate 0.33 times more return on investment than Bactiquant. However, OMX Copenhagen All is 3.06 times less risky than Bactiquant. It trades about -0.08 of its potential returns per unit of risk. Bactiquant AS is currently generating about -0.26 per unit of risk. If you would invest 175,751 in OMX Copenhagen All on August 29, 2024 and sell it today you would lose (4,707) from holding OMX Copenhagen All or give up 2.68% of portfolio value over 90 days.

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

OMX Copenhagen All vs. Bactiquant AS

Performance

Timeline

OMX Copenhagen and Bactiquant Volatility Contrast

Predicted Return Density

Returns

OMX Copenhagen All

Pair trading matchups for OMX Copenhagen

	OMX Copenhagen vs. Strategic Investments AS
	OMX Copenhagen vs. Nordinvestments AS
	OMX Copenhagen vs. Groenlandsbanken AS
	OMX Copenhagen vs. Kreditbanken AS

Bactiquant AS

Pair trading matchups for Bactiquant

	Bactiquant vs. Skjern Bank AS
	Bactiquant vs. North Media AS
	Bactiquant vs. Nordfyns Bank AS
	Bactiquant vs. PARKEN Sport Entertainment

Pair Trading with OMX Copenhagen and Bactiquant

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

	OMX Copenhagen vs. Strategic Investments AS
	OMX Copenhagen vs. Nordinvestments AS
	OMX Copenhagen vs. Groenlandsbanken AS
	OMX Copenhagen vs. Kreditbanken AS

The idea behind OMX Copenhagen All and Bactiquant AS 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.

	Bactiquant vs. Skjern Bank AS
	Bactiquant vs. North Media AS
	Bactiquant vs. Nordfyns Bank AS
	Bactiquant vs. PARKEN Sport Entertainment

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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.

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