Correlation Between DBS Group and Nordea Bank

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

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

Diversification Opportunities for DBS Group and Nordea Bank

-0.6

Correlation Coefficient

DBS Group  Nordea Bank

Excellent diversification

The 3 months correlation between DBS and Nordea is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding DBS Group Holdings 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 DBS Group 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 DBS Group Holdings 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 DBS Group i.e., DBS Group and Nordea Bank go up and down completely randomly.

Pair Corralation between DBS Group and Nordea Bank

Assuming the 90 days horizon DBS Group Holdings is expected to generate 1.92 times more return on investment than Nordea Bank. However, DBS Group is 1.92 times more volatile than Nordea Bank Abp. It trades about 0.05 of its potential returns per unit of risk. Nordea Bank Abp is currently generating about 0.01 per unit of risk. If you would invest  1,974  in DBS Group Holdings on September 25, 2024 and sell it today you would earn a total of  1,276  from holding DBS Group Holdings or generate 64.64% return on investment over 90 days.

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

DBS Group Holdings  vs.  Nordea Bank Abp

DBS Group Holdings

Risk-Adjusted Performance

5 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DBS Group Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, DBS Group reported solid returns over the last few months and may actually be approaching a breakup point.

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 latest unsteady performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with DBS Group and Nordea Bank

The main advantage of trading using opposite DBS Group and Nordea Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DBS Group 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 DBS Group Holdings 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.