Correlation Between OMX Helsinki and NoHo Partners

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

Diversification Opportunities for OMX Helsinki and NoHo Partners

-0.52

Correlation Coefficient

OMX Helsinki  NoHo Partners

Excellent diversification

The 3 months correlation between OMX and NoHo is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding OMX Helsinki 25 and NoHo Partners Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NoHo Partners Oyj 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 NoHo Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NoHo Partners Oyj has no effect on the direction of OMX Helsinki i.e., OMX Helsinki and NoHo Partners go up and down completely randomly.

Pair Corralation between OMX Helsinki and NoHo Partners

Assuming the 90 days trading horizon OMX Helsinki 25 is expected to under-perform the NoHo Partners. But the index apears to be less risky and, when comparing its historical volatility, OMX Helsinki 25 is 1.73 times less risky than NoHo Partners. The index trades about -0.02 of its potential returns per unit of risk. The NoHo Partners Oyj is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  732.00  in NoHo Partners Oyj on September 29, 2024 and sell it today you would earn a total of  44.00  from holding NoHo Partners Oyj or generate 6.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.0%
Values	Daily Returns

OMX Helsinki 25  vs.  NoHo Partners Oyj

Pair Trading with OMX Helsinki and NoHo Partners

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

The idea behind OMX Helsinki 25 and NoHo Partners Oyj 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.