Correlation Between Nordic Asia and TF Bank

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

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

Diversification Opportunities for Nordic Asia and TF Bank

-0.45

Correlation Coefficient

Nordic Asia  TF Bank

Very good diversification

The 3 months correlation between Nordic and TFBANK is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Asia Investment and TF Bank AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TF Bank AB and Nordic Asia 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 Nordic Asia Investment are associated (or correlated) with TF Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TF Bank AB has no effect on the direction of Nordic Asia i.e., Nordic Asia and TF Bank go up and down completely randomly.

Pair Corralation between Nordic Asia and TF Bank

Assuming the 90 days trading horizon Nordic Asia Investment is expected to under-perform the TF Bank. In addition to that, Nordic Asia is 1.16 times more volatile than TF Bank AB. It trades about -0.04 of its total potential returns per unit of risk. TF Bank AB is currently generating about 0.11 per unit of volatility. If you would invest  12,900  in TF Bank AB on December 4, 2024 and sell it today you would earn a total of  25,600  from holding TF Bank AB or generate 198.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Nordic Asia Investment  vs.  TF Bank AB

Nordic Asia Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nordic Asia Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

TF Bank AB

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TF Bank AB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, TF Bank may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Nordic Asia and TF Bank

The main advantage of trading using opposite Nordic Asia and TF Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nordic Asia position performs unexpectedly, TF 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 TF Bank will offset losses from the drop in TF Bank's long position.

The idea behind Nordic Asia Investment and TF Bank AB 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.