Correlation Between Nordea Bank and H Lundbeck

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

Diversification Opportunities for Nordea Bank and H Lundbeck

-0.43

Correlation Coefficient

Nordea Bank  H Lundbeck

Very good diversification

The 3 months correlation between Nordea and HLUN-A is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Nordea Bank Abp and H Lundbeck AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H Lundbeck AS 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 H Lundbeck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H Lundbeck AS has no effect on the direction of Nordea Bank i.e., Nordea Bank and H Lundbeck go up and down completely randomly.

Pair Corralation between Nordea Bank and H Lundbeck

Assuming the 90 days trading horizon Nordea Bank Abp is expected to generate 0.7 times more return on investment than H Lundbeck. However, Nordea Bank Abp is 1.42 times less risky than H Lundbeck. It trades about 0.06 of its potential returns per unit of risk. H Lundbeck AS is currently generating about -0.11 per unit of risk. If you would invest  7,708  in Nordea Bank Abp on September 11, 2024 and sell it today you would earn a total of  356.00  from holding Nordea Bank Abp or generate 4.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Nordea Bank Abp  vs.  H Lundbeck AS

Nordea Bank Abp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nordea Bank Abp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Nordea Bank is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

H Lundbeck AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days H Lundbeck AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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 H Lundbeck

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

The idea behind Nordea Bank Abp and H Lundbeck AS 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.