Correlation Between Nordea Bank and Alien Metals

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

Diversification Opportunities for Nordea Bank and Alien Metals

0.46

Correlation Coefficient

Nordea Bank  Alien Metals

Very weak diversification

The 3 months correlation between Nordea and Alien is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Nordea Bank Abp and Alien Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alien Metals 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 Alien Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alien Metals has no effect on the direction of Nordea Bank i.e., Nordea Bank and Alien Metals go up and down completely randomly.

Pair Corralation between Nordea Bank and Alien Metals

Assuming the 90 days trading horizon Nordea Bank Abp is expected to generate 0.55 times more return on investment than Alien Metals. However, Nordea Bank Abp is 1.83 times less risky than Alien Metals. It trades about 0.09 of its potential returns per unit of risk. Alien Metals is currently generating about -0.14 per unit of risk. If you would invest  12,450  in Nordea Bank Abp on October 11, 2024 and sell it today you would earn a total of  230.00  from holding Nordea Bank Abp or generate 1.85% return on investment over 90 days.

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

Nordea Bank Abp  vs.  Alien Metals

Nordea Bank Abp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nordea Bank Abp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Nordea Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Alien Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alien Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Nordea Bank and Alien Metals

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

The idea behind Nordea Bank Abp and Alien Metals 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..