Correlation Between Arion Banki and Norion Bank

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

By analyzing existing cross correlation between Arion banki hf and Norion Bank, you can compare the effects of market volatilities on Arion Banki and Norion Bank 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 Arion Banki with a short position of Norion Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arion Banki and Norion Bank.

Diversification Opportunities for Arion Banki and Norion Bank

-0.17

Correlation Coefficient

Arion Banki  Norion Bank

Good diversification

The 3 months correlation between Arion and Norion is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Arion banki hf and Norion Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norion Bank and Arion Banki 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 Arion banki hf are associated (or correlated) with Norion Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norion Bank has no effect on the direction of Arion Banki i.e., Arion Banki and Norion Bank go up and down completely randomly.

Pair Corralation between Arion Banki and Norion Bank

Assuming the 90 days trading horizon Arion banki hf is expected to generate 0.9 times more return on investment than Norion Bank. However, Arion banki hf is 1.11 times less risky than Norion Bank. It trades about 0.16 of its potential returns per unit of risk. Norion Bank is currently generating about -0.01 per unit of risk. If you would invest  1,040  in Arion banki hf on September 3, 2024 and sell it today you would earn a total of  200.00  from holding Arion banki hf or generate 19.23% return on investment over 90 days.

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

Arion banki hf  vs.  Norion Bank

Arion banki hf

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arion banki hf are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Arion Banki unveiled solid returns over the last few months and may actually be approaching a breakup point.

Norion Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Norion Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Norion Bank is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Arion Banki and Norion Bank

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

The idea behind Arion banki hf and Norion Bank 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..