Correlation Between Nordea Bank and First Bankers

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

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

Diversification Opportunities for Nordea Bank and First Bankers

-0.39

Correlation Coefficient

Nordea Bank  First Bankers

Very good diversification

The 3 months correlation between Nordea and First is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Nordea Bank Abp and First Bankers Trustshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Bankers Trustshares and Nordea 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 Nordea Bank Abp are associated (or correlated) with First Bankers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Bankers Trustshares has no effect on the direction of Nordea Bank i.e., Nordea Bank and First Bankers go up and down completely randomly.

Pair Corralation between Nordea Bank and First Bankers

Assuming the 90 days horizon Nordea Bank Abp is expected to under-perform the First Bankers. In addition to that, Nordea Bank is 2.1 times more volatile than First Bankers Trustshares. It trades about -0.17 of its total potential returns per unit of risk. First Bankers Trustshares is currently generating about -0.01 per unit of volatility. If you would invest  1,685  in First Bankers Trustshares on October 6, 2024 and sell it today you would lose (4.00) from holding First Bankers Trustshares or give up 0.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	85.0%
Values	Daily Returns

Nordea Bank Abp  vs.  First Bankers Trustshares

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 nearly stable forward-looking signals, Nordea Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

First Bankers Trustshares

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Bankers Trustshares are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, First Bankers is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Nordea Bank and First Bankers

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

The idea behind Nordea Bank Abp and First Bankers Trustshares 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.