Correlation Between OMX Stockholm and KlaraBo Sverige

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

Diversification Opportunities for OMX Stockholm and KlaraBo Sverige

0.34
  Correlation Coefficient

Weak diversification

The 3 months correlation between OMX and KlaraBo is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding OMX Stockholm Mid and KlaraBo Sverige AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KlaraBo Sverige 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 KlaraBo Sverige. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KlaraBo Sverige AB has no effect on the direction of OMX Stockholm i.e., OMX Stockholm and KlaraBo Sverige go up and down completely randomly.
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Pair Corralation between OMX Stockholm and KlaraBo Sverige

Assuming the 90 days trading horizon OMX Stockholm Mid is expected to generate 0.31 times more return on investment than KlaraBo Sverige. However, OMX Stockholm Mid is 3.21 times less risky than KlaraBo Sverige. It trades about -0.07 of its potential returns per unit of risk. KlaraBo Sverige AB is currently generating about -0.12 per unit of risk. If you would invest  165,549  in OMX Stockholm Mid on September 1, 2024 and sell it today you would lose (2,062) from holding OMX Stockholm Mid or give up 1.25% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

OMX Stockholm Mid  vs.  KlaraBo Sverige AB

 Performance 
       Timeline  

OMX Stockholm and KlaraBo Sverige Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with OMX Stockholm and KlaraBo Sverige

The main advantage of trading using opposite OMX Stockholm and KlaraBo Sverige positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OMX Stockholm position performs unexpectedly, KlaraBo Sverige 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 KlaraBo Sverige will offset losses from the drop in KlaraBo Sverige's long position.
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The idea behind OMX Stockholm Mid and KlaraBo Sverige 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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