Correlation Between Nordea Bank and LED IBond

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

Diversification Opportunities for Nordea Bank and LED IBond

-0.57

Correlation Coefficient

Nordea Bank  LED IBond

Excellent diversification

The 3 months correlation between Nordea and LED is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Nordea Bank Abp and LED iBond International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LED iBond International 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 LED IBond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LED iBond International has no effect on the direction of Nordea Bank i.e., Nordea Bank and LED IBond go up and down completely randomly.

Pair Corralation between Nordea Bank and LED IBond

Assuming the 90 days trading horizon Nordea Bank Abp is expected to generate 0.25 times more return on investment than LED IBond. However, Nordea Bank Abp is 4.05 times less risky than LED IBond. It trades about 0.16 of its potential returns per unit of risk. LED iBond International is currently generating about -0.07 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  1,140  from holding Nordea Bank Abp or generate 14.65% 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.  LED iBond International

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.

LED iBond International

Risk-Adjusted Performance

Very Weak

Over the last 90 days LED iBond International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental drivers remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Nordea Bank and LED IBond

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

The idea behind Nordea Bank Abp and LED iBond International 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .