Correlation Between Danske Invest and Nordea Bank

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

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

Diversification Opportunities for Danske Invest and Nordea Bank

0.12

Correlation Coefficient

Danske Invest  Nordea Bank

Average diversification

The 3 months correlation between Danske and Nordea is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Danske Invest Mix 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 Danske Invest 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 Danske Invest Mix 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 Danske Invest i.e., Danske Invest and Nordea Bank go up and down completely randomly.

Pair Corralation between Danske Invest and Nordea Bank

Assuming the 90 days trading horizon Danske Invest Mix is expected to under-perform the Nordea Bank. But the stock apears to be less risky and, when comparing its historical volatility, Danske Invest Mix is 5.46 times less risky than Nordea Bank. The stock trades about -0.17 of its potential returns per unit of risk. The Nordea Bank Abp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  8,132  in Nordea Bank Abp on October 9, 2024 and sell it today you would earn a total of  76.00  from holding Nordea Bank Abp or generate 0.93% return on investment over 90 days.

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

Danske Invest Mix  vs.  Nordea Bank Abp

Danske Invest Mix

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Danske Invest Mix are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward indicators, Danske Invest is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nordea Bank Abp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nordea Bank Abp are ranked lower than 4 (%) 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 Danske Invest and Nordea Bank

The main advantage of trading using opposite Danske Invest and Nordea Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Danske Invest 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 Danske Invest Mix 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.