Correlation Between OMX Helsinki and Robit Oyj

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

Diversification Opportunities for OMX Helsinki and Robit Oyj

0.93

Correlation Coefficient

OMX Helsinki  Robit Oyj

Almost no diversification

The 3 months correlation between OMX and Robit is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding OMX Helsinki 25 and Robit Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Robit 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 Robit Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Robit Oyj has no effect on the direction of OMX Helsinki i.e., OMX Helsinki and Robit Oyj go up and down completely randomly.

Pair Corralation between OMX Helsinki and Robit Oyj

Assuming the 90 days trading horizon OMX Helsinki 25 is expected to generate 0.33 times more return on investment than Robit Oyj. However, OMX Helsinki 25 is 3.0 times less risky than Robit Oyj. It trades about -0.19 of its potential returns per unit of risk. Robit Oyj is currently generating about -0.13 per unit of risk. If you would invest  473,564  in OMX Helsinki 25 on September 29, 2024 and sell it today you would lose (41,455) from holding OMX Helsinki 25 or give up 8.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

OMX Helsinki 25  vs.  Robit Oyj

Pair Trading with OMX Helsinki and Robit Oyj

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

The idea behind OMX Helsinki 25 and Robit 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.