Correlation Between Nordea Bank and Purmo Group

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

Diversification Opportunities for Nordea Bank and Purmo Group

0.0

Correlation Coefficient

Nordea Bank  Purmo Group

Pay attention - limited upside

The 3 months correlation between Nordea and Purmo is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Nordea Bank Abp and Purmo Group Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Purmo Group 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 Purmo Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Purmo Group Oyj has no effect on the direction of Nordea Bank i.e., Nordea Bank and Purmo Group go up and down completely randomly.

Pair Corralation between Nordea Bank and Purmo Group

Assuming the 90 days trading horizon Nordea Bank Abp is expected to under-perform the Purmo Group. In addition to that, Nordea Bank is 2.25 times more volatile than Purmo Group Oyj. It trades about -0.09 of its total potential returns per unit of risk. Purmo Group Oyj is currently generating about 0.14 per unit of volatility. If you would invest  1,130  in Purmo Group Oyj on October 5, 2024 and sell it today you would earn a total of  15.00  from holding Purmo Group Oyj or generate 1.33% return on investment over 90 days.

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

Nordea Bank Abp  vs.  Purmo Group Oyj

Nordea Bank Abp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nordea Bank Abp are ranked lower than 2 (%) 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.

Purmo Group Oyj

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Purmo Group Oyj are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Purmo Group is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Nordea Bank and Purmo Group

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

The idea behind Nordea Bank Abp and Purmo Group 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..