Correlation Between Nordea Bank and Eniro AB

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

Diversification Opportunities for Nordea Bank and Eniro AB

0.72

Correlation Coefficient

Nordea Bank  Eniro AB

Poor diversification

The 3 months correlation between Nordea and Eniro is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Nordea Bank Abp and Eniro AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eniro AB 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 Eniro AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eniro AB has no effect on the direction of Nordea Bank i.e., Nordea Bank and Eniro AB go up and down completely randomly.

Pair Corralation between Nordea Bank and Eniro AB

Assuming the 90 days trading horizon Nordea Bank is expected to generate 1.96 times less return on investment than Eniro AB. But when comparing it to its historical volatility, Nordea Bank Abp is 2.27 times less risky than Eniro AB. It trades about 0.19 of its potential returns per unit of risk. Eniro AB is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  46.00  in Eniro AB on December 1, 2024 and sell it today you would earn a total of  12.00  from holding Eniro AB or generate 26.09% return on investment over 90 days.

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

Nordea Bank Abp  vs.  Eniro AB

Nordea Bank Abp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nordea Bank Abp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Nordea Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Eniro AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eniro AB are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Eniro AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nordea Bank and Eniro AB

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

The idea behind Nordea Bank Abp and Eniro AB 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.