Correlation Between Nordea Bank and Nokian Renkaat

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

Diversification Opportunities for Nordea Bank and Nokian Renkaat

-0.69

Correlation Coefficient

Nordea Bank  Nokian Renkaat

Excellent diversification

The 3 months correlation between Nordea and Nokian is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Nordea Bank Abp and Nokian Renkaat Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nokian Renkaat 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 Nokian Renkaat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nokian Renkaat Oyj has no effect on the direction of Nordea Bank i.e., Nordea Bank and Nokian Renkaat go up and down completely randomly.

Pair Corralation between Nordea Bank and Nokian Renkaat

Assuming the 90 days trading horizon Nordea Bank Abp is expected to generate 0.49 times more return on investment than Nokian Renkaat. However, Nordea Bank Abp is 2.06 times less risky than Nokian Renkaat. It trades about 0.29 of its potential returns per unit of risk. Nokian Renkaat Oyj is currently generating about -0.05 per unit of risk. If you would invest  969.00  in Nordea Bank Abp on December 24, 2024 and sell it today you would earn a total of  226.00  from holding Nordea Bank Abp or generate 23.32% return on investment over 90 days.

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

Nordea Bank Abp  vs.  Nokian Renkaat 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 22 (%) 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.

Nokian Renkaat Oyj

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nokian Renkaat Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Nordea Bank and Nokian Renkaat

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

The idea behind Nordea Bank Abp and Nokian Renkaat 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.