Correlation Between Nordea Bank and Fabege AB

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

Diversification Opportunities for Nordea Bank and Fabege AB

0.11

Correlation Coefficient

Nordea Bank  Fabege AB

Average diversification

The 3 months correlation between Nordea and Fabege is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Nordea Bank Abp and Fabege AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fabege 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 Fabege AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fabege AB has no effect on the direction of Nordea Bank i.e., Nordea Bank and Fabege AB go up and down completely randomly.

Pair Corralation between Nordea Bank and Fabege AB

Assuming the 90 days trading horizon Nordea Bank Abp is expected to generate 0.79 times more return on investment than Fabege AB. However, Nordea Bank Abp is 1.26 times less risky than Fabege AB. It trades about 0.2 of its potential returns per unit of risk. Fabege AB is currently generating about 0.03 per unit of risk. If you would invest  12,355  in Nordea Bank Abp on November 28, 2024 and sell it today you would earn a total of  1,700  from holding Nordea Bank Abp or generate 13.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.1%
Values	Daily Returns

Nordea Bank Abp  vs.  Fabege 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 15 (%) 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.

Fabege AB

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fabege AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fabege AB is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Nordea Bank and Fabege AB

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

The idea behind Nordea Bank Abp and Fabege 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.

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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.