Correlation Between National Capital and Nordea Bank

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

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

Diversification Opportunities for National Capital and Nordea Bank

0.08

Correlation Coefficient

National Capital  Nordea Bank

Significant diversification

The 3 months correlation between National and Nordea is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding National Capital Bank 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 National Capital 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 National Capital Bank 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 National Capital i.e., National Capital and Nordea Bank go up and down completely randomly.

Pair Corralation between National Capital and Nordea Bank

Given the investment horizon of 90 days National Capital Bank is expected to generate 83.32 times more return on investment than Nordea Bank. However, National Capital is 83.32 times more volatile than Nordea Bank Abp. It trades about 0.31 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  16,500  in National Capital Bank on September 20, 2024 and sell it today you would lose (9,000) from holding National Capital Bank or give up 54.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	69.29%
Values	Daily Returns

National Capital Bank  vs.  Nordea Bank Abp

National Capital Bank

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in National Capital Bank are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, National Capital sustained 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 weak 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 National Capital and Nordea Bank

The main advantage of trading using opposite National Capital and Nordea Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Capital 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 National Capital Bank 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.