Correlation Between Nordea North and Nordea 1

Can any of the company-specific risk be diversified away by investing in both Nordea North and Nordea 1 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 North and Nordea 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nordea North American and Nordea 1 , you can compare the effects of market volatilities on Nordea North and Nordea 1 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 North with a short position of Nordea 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordea North and Nordea 1.

Diversification Opportunities for Nordea North and Nordea 1

0.65

Correlation Coefficient

Nordea North  Nordea 1

Poor diversification

The 3 months correlation between Nordea and Nordea is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Nordea North American and Nordea 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordea 1 and Nordea North 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 North American are associated (or correlated) with Nordea 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordea 1 has no effect on the direction of Nordea North i.e., Nordea North and Nordea 1 go up and down completely randomly.

Pair Corralation between Nordea North and Nordea 1

Assuming the 90 days trading horizon Nordea North American is expected to under-perform the Nordea 1. But the fund apears to be less risky and, when comparing its historical volatility, Nordea North American is 1.07 times less risky than Nordea 1. The fund trades about -0.18 of its potential returns per unit of risk. The Nordea 1 is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  157,291  in Nordea 1 on December 27, 2024 and sell it today you would lose (6,764) from holding Nordea 1 or give up 4.3% of portfolio value over 90 days.

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

Nordea North American  vs.  Nordea 1

Nordea North American

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nordea North American has generated negative risk-adjusted returns adding no value to fund investors. Despite latest fragile performance, the Fund's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the mutual fund stockholders.

Nordea 1

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nordea 1 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Nordea 1 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nordea North and Nordea 1

The main advantage of trading using opposite Nordea North and Nordea 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nordea North position performs unexpectedly, Nordea 1 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 Nordea 1 will offset losses from the drop in Nordea 1's long position.

The idea behind Nordea North American and Nordea 1 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.