Correlation Between Nordea Bank and Danske Invest

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

Diversification Opportunities for Nordea Bank and Danske Invest

-0.38

Correlation Coefficient

Nordea Bank  Danske Invest

Very good diversification

The 3 months correlation between Nordea and Danske is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Nordea Bank Abp and Danske Invest Mix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danske Invest Mix 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 Danske Invest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danske Invest Mix has no effect on the direction of Nordea Bank i.e., Nordea Bank and Danske Invest go up and down completely randomly.

Pair Corralation between Nordea Bank and Danske Invest

Assuming the 90 days trading horizon Nordea Bank Abp is expected to generate 6.13 times more return on investment than Danske Invest. However, Nordea Bank is 6.13 times more volatile than Danske Invest Mix. It trades about 0.16 of its potential returns per unit of risk. Danske Invest Mix is currently generating about -0.08 per unit of risk. If you would invest  7,782  in Nordea Bank Abp on December 24, 2024 and sell it today you would earn a total of  1,114  from holding Nordea Bank Abp or generate 14.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Nordea Bank Abp  vs.  Danske Invest Mix

Nordea Bank Abp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nordea Bank Abp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Nordea Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Danske Invest Mix

Risk-Adjusted Performance

Very Weak

Over the last 90 days Danske Invest Mix has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Danske Invest is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nordea Bank and Danske Invest

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

The idea behind Nordea Bank Abp and Danske Invest Mix 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.