Correlation Between Nordea Bank and Intermediate Capital

Can any of the company-specific risk be diversified away by investing in both Nordea Bank and Intermediate Capital 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 Nordea Bank and Intermediate Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nordea Bank Abp and Intermediate Capital Group, you can compare the effects of market volatilities on Nordea Bank and Intermediate Capital 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 Nordea Bank with a short position of Intermediate Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordea Bank and Intermediate Capital.

Diversification Opportunities for Nordea Bank and Intermediate Capital

0.24

Correlation Coefficient

Nordea Bank  Intermediate Capital

Modest diversification

The 3 months correlation between Nordea and Intermediate is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Nordea Bank Abp and Intermediate Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intermediate Capital and Nordea Bank 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 Nordea Bank Abp are associated (or correlated) with Intermediate Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intermediate Capital has no effect on the direction of Nordea Bank i.e., Nordea Bank and Intermediate Capital go up and down completely randomly.

Pair Corralation between Nordea Bank and Intermediate Capital

Assuming the 90 days trading horizon Nordea Bank Abp is expected to generate 0.54 times more return on investment than Intermediate Capital. However, Nordea Bank Abp is 1.86 times less risky than Intermediate Capital. It trades about 0.25 of its potential returns per unit of risk. Intermediate Capital Group is currently generating about 0.01 per unit of risk. If you would invest  11,011  in Nordea Bank Abp on December 25, 2024 and sell it today you would earn a total of  2,004  from holding Nordea Bank Abp or generate 18.2% return on investment over 90 days.

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

Nordea Bank Abp  vs.  Intermediate Capital Group

Nordea Bank Abp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nordea Bank Abp are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Nordea Bank unveiled solid returns over the last few months and may actually be approaching a breakup point.

Intermediate Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Intermediate Capital Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Intermediate Capital is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Nordea Bank and Intermediate Capital

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

The idea behind Nordea Bank Abp and Intermediate Capital Group 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.