Correlation Between OMX Helsinki and SSAB AB

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

By analyzing existing cross correlation between OMX Helsinki 25 and SSAB AB ser, you can compare the effects of market volatilities on OMX Helsinki and SSAB AB 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 Helsinki with a short position of SSAB AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of OMX Helsinki and SSAB AB.

Diversification Opportunities for OMX Helsinki and SSAB AB

-0.19

Correlation Coefficient

OMX Helsinki  SSAB AB

Good diversification

The 3 months correlation between OMX and SSAB is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding OMX Helsinki 25 and SSAB AB ser in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSAB AB ser and OMX Helsinki 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 Helsinki 25 are associated (or correlated) with SSAB AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSAB AB ser has no effect on the direction of OMX Helsinki i.e., OMX Helsinki and SSAB AB go up and down completely randomly.

Pair Corralation between OMX Helsinki and SSAB AB

Assuming the 90 days trading horizon OMX Helsinki 25 is expected to under-perform the SSAB AB. But the index apears to be less risky and, when comparing its historical volatility, OMX Helsinki 25 is 38.09 times less risky than SSAB AB. The index trades about 0.0 of its potential returns per unit of risk. The SSAB AB ser is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  435.00  in SSAB AB ser on January 31, 2024 and sell it today you would earn a total of  105.00  from holding SSAB AB ser or generate 24.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.4%
Values	Daily Returns

OMX Helsinki 25  vs.  SSAB AB ser

Pair Trading with OMX Helsinki and SSAB AB

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

The idea behind OMX Helsinki 25 and SSAB AB ser 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.