Correlation Between OMX Copenhagen and IA Invest

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

Diversification Opportunities for OMX Copenhagen and IA Invest

-0.27
  Correlation Coefficient

Very good diversification

The 3 months correlation between OMX and IAIPGA is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding OMX Copenhagen All and IA Invest Peruma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IA Invest Peruma 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 IA Invest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IA Invest Peruma has no effect on the direction of OMX Copenhagen i.e., OMX Copenhagen and IA Invest go up and down completely randomly.
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Pair Corralation between OMX Copenhagen and IA Invest

Assuming the 90 days trading horizon OMX Copenhagen is expected to generate 1.32 times less return on investment than IA Invest. In addition to that, OMX Copenhagen is 1.65 times more volatile than IA Invest Peruma. It trades about 0.14 of its total potential returns per unit of risk. IA Invest Peruma is currently generating about 0.31 per unit of volatility. If you would invest  13,445  in IA Invest Peruma on September 20, 2024 and sell it today you would earn a total of  475.00  from holding IA Invest Peruma or generate 3.53% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy77.27%
ValuesDaily Returns

OMX Copenhagen All  vs.  IA Invest Peruma

 Performance 
       Timeline  

OMX Copenhagen and IA Invest Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with OMX Copenhagen and IA Invest

The main advantage of trading using opposite OMX Copenhagen and IA Invest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OMX Copenhagen position performs unexpectedly, IA Invest 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 IA Invest will offset losses from the drop in IA Invest's long position.
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The idea behind OMX Copenhagen All and IA Invest Peruma 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.

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