Correlation Between OMX Stockholm and SBB-B

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

Diversification Opportunities for OMX Stockholm and SBB-B

0.68

Correlation Coefficient

OMX Stockholm

SBB-B

Poor diversification

The 3 months correlation between OMX and SBB-B is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding OMX Stockholm Mid and Samhllsbyggnadsbolaget i Norde in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samhllsbyggnadsbolaget 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 SBB-B. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samhllsbyggnadsbolaget has no effect on the direction of OMX Stockholm i.e., OMX Stockholm and SBB-B go up and down completely randomly.

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Pair Corralation between OMX Stockholm and SBB-B

Assuming the 90 days trading horizon OMX Stockholm Mid is expected to generate 0.14 times more return on investment than SBB-B. However, OMX Stockholm Mid is 6.94 times less risky than SBB-B. It trades about -0.2 of its potential returns per unit of risk. Samhllsbyggnadsbolaget i Norden is currently generating about -0.31 per unit of risk. If you would invest 167,920 in OMX Stockholm Mid on August 28, 2024 and sell it today you would lose (5,515) from holding OMX Stockholm Mid or give up 3.28% of portfolio value over 90 days.

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

OMX Stockholm Mid vs. Samhllsbyggnadsbolaget i Norde

Performance

Timeline

OMX Stockholm and SBB-B Volatility Contrast

Predicted Return Density

Returns

OMX Stockholm Mid

Pair trading matchups for OMX Stockholm

	OMX Stockholm vs. Skandinaviska Enskilda Banken
	OMX Stockholm vs. Indutrade AB
	OMX Stockholm vs. Arion banki hf
	OMX Stockholm vs. Fractal Gaming Group

Samhllsbyggnadsbolaget i Norden

Pair trading matchups for SBB-B

	SBB-B vs. Sinch AB
	SBB-B vs. Embracer Group AB
	SBB-B vs. Investor AB ser
	SBB-B vs. Castellum AB

Pair Trading with OMX Stockholm and SBB-B

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

	OMX Stockholm vs. Skandinaviska Enskilda Banken
	OMX Stockholm vs. Indutrade AB
	OMX Stockholm vs. Arion banki hf
	OMX Stockholm vs. Fractal Gaming Group

The idea behind OMX Stockholm Mid and Samhllsbyggnadsbolaget i Norden 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.

	SBB-B vs. Sinch AB
	SBB-B vs. Embracer Group AB
	SBB-B vs. Investor AB ser
	SBB-B vs. Castellum AB

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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