Correlation Between Nordea Bank and Firefly AB

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

Diversification Opportunities for Nordea Bank and Firefly AB

0.03

Correlation Coefficient

Nordea Bank  Firefly AB

Significant diversification

The 3 months correlation between Nordea and Firefly is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Nordea Bank Abp and Firefly AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Firefly 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 Firefly AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Firefly AB has no effect on the direction of Nordea Bank i.e., Nordea Bank and Firefly AB go up and down completely randomly.

Pair Corralation between Nordea Bank and Firefly AB

Assuming the 90 days trading horizon Nordea Bank Abp is expected to generate 0.45 times more return on investment than Firefly AB. However, Nordea Bank Abp is 2.21 times less risky than Firefly AB. It trades about 0.57 of its potential returns per unit of risk. Firefly AB is currently generating about 0.04 per unit of risk. If you would invest  11,985  in Nordea Bank Abp on October 26, 2024 and sell it today you would earn a total of  1,320  from holding Nordea Bank Abp or generate 11.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

Nordea Bank Abp  vs.  Firefly AB

Nordea Bank Abp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nordea Bank Abp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Nordea Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Firefly AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Firefly AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Nordea Bank and Firefly AB

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

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