Correlation Between BankInvest Optima and Nordea Bank

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

By analyzing existing cross correlation between BankInvest Optima 30 and Nordea Bank Abp, you can compare the effects of market volatilities on BankInvest Optima 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 BankInvest Optima with a short position of Nordea Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of BankInvest Optima and Nordea Bank.

Diversification Opportunities for BankInvest Optima and Nordea Bank

0.14

Correlation Coefficient

BankInvest Optima  Nordea Bank

Average diversification

The 3 months correlation between BankInvest and Nordea is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding BankInvest Optima 30 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 BankInvest Optima 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 BankInvest Optima 30 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 BankInvest Optima i.e., BankInvest Optima and Nordea Bank go up and down completely randomly.

Pair Corralation between BankInvest Optima and Nordea Bank

Assuming the 90 days trading horizon BankInvest Optima 30 is expected to generate 0.26 times more return on investment than Nordea Bank. However, BankInvest Optima 30 is 3.84 times less risky than Nordea Bank. It trades about 0.09 of its potential returns per unit of risk. Nordea Bank Abp is currently generating about 0.02 per unit of risk. If you would invest  9,450  in BankInvest Optima 30 on October 4, 2024 and sell it today you would earn a total of  1,670  from holding BankInvest Optima 30 or generate 17.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.78%
Values	Daily Returns

BankInvest Optima 30  vs.  Nordea Bank Abp

BankInvest Optima

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BankInvest Optima 30 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, BankInvest Optima is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Nordea Bank Abp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nordea Bank Abp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Nordea Bank is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BankInvest Optima and Nordea Bank

The main advantage of trading using opposite BankInvest Optima and Nordea Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BankInvest Optima 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 BankInvest Optima 30 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.