Correlation Between Nordea Bank and Bank of Hawaii

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

Diversification Opportunities for Nordea Bank and Bank of Hawaii

-0.3

Correlation Coefficient

Nordea Bank  Bank of Hawaii

Very good diversification

The 3 months correlation between Nordea and Bank is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Nordea Bank Abp and Bank of Hawaii in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Hawaii 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 Bank of Hawaii. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Hawaii has no effect on the direction of Nordea Bank i.e., Nordea Bank and Bank of Hawaii go up and down completely randomly.

Pair Corralation between Nordea Bank and Bank of Hawaii

Assuming the 90 days horizon Nordea Bank Abp is expected to generate 0.56 times more return on investment than Bank of Hawaii. However, Nordea Bank Abp is 1.8 times less risky than Bank of Hawaii. It trades about 0.02 of its potential returns per unit of risk. Bank of Hawaii is currently generating about 0.01 per unit of risk. If you would invest  957.00  in Nordea Bank Abp on September 28, 2024 and sell it today you would earn a total of  131.00  from holding Nordea Bank Abp or generate 13.69% return on investment over 90 days.

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

Nordea Bank Abp  vs.  Bank of Hawaii

Nordea Bank Abp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nordea Bank Abp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Bank of Hawaii

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Hawaii are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Bank of Hawaii demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nordea Bank and Bank of Hawaii

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

The idea behind Nordea Bank Abp and Bank of Hawaii 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .