Correlation Between Oslo Exchange and Baltic Sea

Can any of the company-specific risk be diversified away by investing in both Oslo Exchange and Baltic Sea 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 Oslo Exchange and Baltic Sea into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Oslo Exchange Mutual and Baltic Sea Properties, you can compare the effects of market volatilities on Oslo Exchange and Baltic Sea 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 Oslo Exchange with a short position of Baltic Sea. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oslo Exchange and Baltic Sea.

Diversification Opportunities for Oslo Exchange and Baltic Sea

0.12

Correlation Coefficient

Oslo Exchange  Baltic Sea

Average diversification

The 3 months correlation between Oslo and Baltic is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Oslo Exchange Mutual and Baltic Sea Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baltic Sea Properties and Oslo Exchange 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 Oslo Exchange Mutual are associated (or correlated) with Baltic Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baltic Sea Properties has no effect on the direction of Oslo Exchange i.e., Oslo Exchange and Baltic Sea go up and down completely randomly.

Pair Corralation between Oslo Exchange and Baltic Sea

Assuming the 90 days trading horizon Oslo Exchange is expected to generate 1.33 times less return on investment than Baltic Sea. But when comparing it to its historical volatility, Oslo Exchange Mutual is 4.11 times less risky than Baltic Sea. It trades about 0.08 of its potential returns per unit of risk. Baltic Sea Properties is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  4,900  in Baltic Sea Properties on September 14, 2024 and sell it today you would earn a total of  100.00  from holding Baltic Sea Properties or generate 2.04% return on investment over 90 days.

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

Oslo Exchange Mutual  vs.  Baltic Sea Properties

Pair Trading with Oslo Exchange and Baltic Sea

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

The idea behind Oslo Exchange Mutual and Baltic Sea Properties 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.