Correlation Between OMX Stockholm and Kollect On

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

Diversification Opportunities for OMX Stockholm and Kollect On

-0.38
  Correlation Coefficient

Very good diversification

The 3 months correlation between OMX and Kollect is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding OMX Stockholm Mid and Kollect on Demand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kollect on Demand 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 Kollect On. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kollect on Demand has no effect on the direction of OMX Stockholm i.e., OMX Stockholm and Kollect On go up and down completely randomly.
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Pair Corralation between OMX Stockholm and Kollect On

Assuming the 90 days trading horizon OMX Stockholm is expected to generate 8.01 times less return on investment than Kollect On. But when comparing it to its historical volatility, OMX Stockholm Mid is 3.2 times less risky than Kollect On. It trades about 0.05 of its potential returns per unit of risk. Kollect on Demand is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  252.00  in Kollect on Demand on September 24, 2024 and sell it today you would earn a total of  14.00  from holding Kollect on Demand or generate 5.56% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

OMX Stockholm Mid  vs.  Kollect on Demand

 Performance 
       Timeline  

OMX Stockholm and Kollect On Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with OMX Stockholm and Kollect On

The main advantage of trading using opposite OMX Stockholm and Kollect On positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OMX Stockholm position performs unexpectedly, Kollect On 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 Kollect On will offset losses from the drop in Kollect On's long position.
The idea behind OMX Stockholm Mid and Kollect on Demand 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..

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