Correlation Between Bank of Hawaii and Nordea Bank

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

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

Diversification Opportunities for Bank of Hawaii and Nordea Bank

-0.16

Correlation Coefficient

Bank of Hawaii  Nordea Bank

Good diversification

The 3 months correlation between Bank and Nordea is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Hawaii 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 Bank of Hawaii 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 Bank of Hawaii 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 Bank of Hawaii i.e., Bank of Hawaii and Nordea Bank go up and down completely randomly.

Pair Corralation between Bank of Hawaii and Nordea Bank

Considering the 90-day investment horizon Bank of Hawaii is expected to under-perform the Nordea Bank. In addition to that, Bank of Hawaii is 1.66 times more volatile than Nordea Bank Abp. It trades about -0.21 of its total potential returns per unit of risk. Nordea Bank Abp is currently generating about 0.03 per unit of volatility. If you would invest  1,129  in Nordea Bank Abp on October 16, 2024 and sell it today you would earn a total of  6.00  from holding Nordea Bank Abp or generate 0.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Bank of Hawaii  vs.  Nordea Bank Abp

Bank of Hawaii

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Hawaii are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Bank of Hawaii is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Nordea Bank Abp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nordea Bank Abp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, Nordea Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bank of Hawaii and Nordea Bank

The main advantage of trading using opposite Bank of Hawaii and Nordea Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Hawaii 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 Bank of Hawaii 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.