Correlation Between Nordea Bank and UniCredit SpA

Can any of the company-specific risk be diversified away by investing in both Nordea Bank and UniCredit SpA 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 UniCredit SpA 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 UniCredit SpA ADR, you can compare the effects of market volatilities on Nordea Bank and UniCredit SpA 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 UniCredit SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordea Bank and UniCredit SpA.

Diversification Opportunities for Nordea Bank and UniCredit SpA

0.66

Correlation Coefficient

Nordea Bank  UniCredit SpA

Poor diversification

The 3 months correlation between Nordea and UniCredit is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Nordea Bank Abp and UniCredit SpA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UniCredit SpA ADR 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 UniCredit SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UniCredit SpA ADR has no effect on the direction of Nordea Bank i.e., Nordea Bank and UniCredit SpA go up and down completely randomly.

Pair Corralation between Nordea Bank and UniCredit SpA

Assuming the 90 days horizon Nordea Bank Abp is expected to under-perform the UniCredit SpA. In addition to that, Nordea Bank is 2.04 times more volatile than UniCredit SpA ADR. It trades about -0.11 of its total potential returns per unit of risk. UniCredit SpA ADR is currently generating about 0.16 per unit of volatility. If you would invest  1,877  in UniCredit SpA ADR on September 27, 2024 and sell it today you would earn a total of  96.00  from holding UniCredit SpA ADR or generate 5.11% return on investment over 90 days.

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

Nordea Bank Abp  vs.  UniCredit SpA ADR

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 latest weak performance, the Stock's forward-looking signals remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

UniCredit SpA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UniCredit SpA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators 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 Nordea Bank and UniCredit SpA

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

The idea behind Nordea Bank Abp and UniCredit SpA ADR 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.