Correlation Between Nordea Bank and AP Mller

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

Diversification Opportunities for Nordea Bank and AP Mller

0.08

Correlation Coefficient

Nordea Bank  AP Mller

Significant diversification

The 3 months correlation between Nordea and MAERSK-B is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Nordea Bank Abp and AP Mller in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AP Mller 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 AP Mller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AP Mller has no effect on the direction of Nordea Bank i.e., Nordea Bank and AP Mller go up and down completely randomly.

Pair Corralation between Nordea Bank and AP Mller

Assuming the 90 days trading horizon Nordea Bank Abp is expected to generate 0.44 times more return on investment than AP Mller. However, Nordea Bank Abp is 2.26 times less risky than AP Mller. It trades about 0.28 of its potential returns per unit of risk. AP Mller is currently generating about 0.06 per unit of risk. If you would invest  7,988  in Nordea Bank Abp on November 29, 2024 and sell it today you would earn a total of  1,570  from holding Nordea Bank Abp or generate 19.65% return on investment over 90 days.

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

Nordea Bank Abp  vs.  AP Mller

Nordea Bank Abp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nordea Bank Abp are ranked lower than 22 (%) 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.

AP Mller

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AP Mller are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, AP Mller may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Nordea Bank and AP Mller

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

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