Correlation Between Nordea Bank and Reka Industrial

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

Diversification Opportunities for Nordea Bank and Reka Industrial

0.28

Correlation Coefficient

Nordea Bank  Reka Industrial

Modest diversification

The 3 months correlation between Nordea and Reka is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Nordea Bank Abp and Reka Industrial Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reka Industrial 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 Reka Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reka Industrial Oyj has no effect on the direction of Nordea Bank i.e., Nordea Bank and Reka Industrial go up and down completely randomly.

Pair Corralation between Nordea Bank and Reka Industrial

Assuming the 90 days trading horizon Nordea Bank Abp is expected to under-perform the Reka Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Nordea Bank Abp is 2.51 times less risky than Reka Industrial. The stock trades about -0.12 of its potential returns per unit of risk. The Reka Industrial Oyj is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  473.00  in Reka Industrial Oyj on October 9, 2024 and sell it today you would earn a total of  17.00  from holding Reka Industrial Oyj or generate 3.59% return on investment over 90 days.

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

Nordea Bank Abp  vs.  Reka Industrial Oyj

Nordea Bank Abp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nordea Bank Abp are ranked lower than 3 (%) 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.

Reka Industrial Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reka Industrial Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Reka Industrial is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Nordea Bank and Reka Industrial

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

The idea behind Nordea Bank Abp and Reka Industrial 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.