Correlation Between BankInv Kort and Nordea Bank

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

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

Diversification Opportunities for BankInv Kort and Nordea Bank

0.75

Correlation Coefficient

BankInv Kort  Nordea Bank

Poor diversification

The 3 months correlation between BankInv and Nordea is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding BankInv Kort HY and Nordea Bank Abp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordea Bank Abp and BankInv Kort 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 BankInv Kort HY are associated (or correlated) with Nordea Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordea Bank Abp has no effect on the direction of BankInv Kort i.e., BankInv Kort and Nordea Bank go up and down completely randomly.

Pair Corralation between BankInv Kort and Nordea Bank

Assuming the 90 days trading horizon BankInv Kort is expected to generate 13.1 times less return on investment than Nordea Bank. But when comparing it to its historical volatility, BankInv Kort HY is 5.5 times less risky than Nordea Bank. It trades about 0.07 of its potential returns per unit of risk. Nordea Bank Abp is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  7,782  in Nordea Bank Abp on December 26, 2024 and sell it today you would earn a total of  1,314  from holding Nordea Bank Abp or generate 16.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

BankInv Kort HY  vs.  Nordea Bank Abp

BankInv Kort HY

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BankInv Kort HY are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, BankInv Kort is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Nordea Bank Abp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nordea Bank Abp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Nordea Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BankInv Kort and Nordea Bank

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

The idea behind BankInv Kort HY and Nordea Bank Abp 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.