Correlation Between Deutsche Bank and Nordea Bank

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

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

Diversification Opportunities for Deutsche Bank and Nordea Bank

0.14

Correlation Coefficient

Deutsche Bank  Nordea Bank

Average diversification

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

Pair Corralation between Deutsche Bank and Nordea Bank

Allowing for the 90-day total investment horizon Deutsche Bank AG is expected to generate 0.93 times more return on investment than Nordea Bank. However, Deutsche Bank AG is 1.07 times less risky than Nordea Bank. It trades about -0.01 of its potential returns per unit of risk. Nordea Bank Abp is currently generating about -0.11 per unit of risk. If you would invest  1,736  in Deutsche Bank AG on September 26, 2024 and sell it today you would lose (32.00) from holding Deutsche Bank AG or give up 1.84% of portfolio value over 90 days.

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

Deutsche Bank AG  vs.  Nordea Bank Abp

Deutsche Bank AG

Risk-Adjusted Performance

0 of 100

Very Weak

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

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. Despite latest weak performance, the Stock's forward-looking signals remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Deutsche Bank and Nordea Bank

The main advantage of trading using opposite Deutsche Bank and Nordea Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deutsche Bank 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 Deutsche Bank AG 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.

Check out your portfolio center.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.