Correlation Between Nordea Bank and Neste Oil

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

Diversification Opportunities for Nordea Bank and Neste Oil

-0.57

Correlation Coefficient

Nordea Bank  Neste Oil

Excellent diversification

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

Pair Corralation between Nordea Bank and Neste Oil

Assuming the 90 days trading horizon Nordea Bank Abp is expected to generate 0.41 times more return on investment than Neste Oil. However, Nordea Bank Abp is 2.42 times less risky than Neste Oil. It trades about 0.26 of its potential returns per unit of risk. Neste Oil Oyj is currently generating about -0.25 per unit of risk. If you would invest  1,071  in Nordea Bank Abp on November 28, 2024 and sell it today you would earn a total of  191.00  from holding Nordea Bank Abp or generate 17.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Nordea Bank Abp  vs.  Neste Oil Oyj

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 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Nordea Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Neste Oil Oyj

Risk-Adjusted Performance

Very Weak

Over the last 90 days Neste Oil Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in March 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Nordea Bank and Neste Oil

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

The idea behind Nordea Bank Abp and Neste Oil Oyj 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.