Correlation Between Nordea Bank and Citizens Financial

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

Diversification Opportunities for Nordea Bank and Citizens Financial

-0.46

Correlation Coefficient

Nordea Bank  Citizens Financial

Very good diversification

The 3 months correlation between Nordea and Citizens is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Nordea Bank Abp and Citizens Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Financial Corp 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 Citizens Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens Financial Corp has no effect on the direction of Nordea Bank i.e., Nordea Bank and Citizens Financial go up and down completely randomly.

Pair Corralation between Nordea Bank and Citizens Financial

Assuming the 90 days horizon Nordea Bank Abp is expected to under-perform the Citizens Financial. But the pink sheet apears to be less risky and, when comparing its historical volatility, Nordea Bank Abp is 1.96 times less risky than Citizens Financial. The pink sheet trades about -0.11 of its potential returns per unit of risk. The Citizens Financial Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,345  in Citizens Financial Corp on September 20, 2024 and sell it today you would earn a total of  80.00  from holding Citizens Financial Corp or generate 3.41% return on investment over 90 days.

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

Nordea Bank Abp  vs.  Citizens Financial Corp

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 weak 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.

Citizens Financial Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Citizens Financial showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nordea Bank and Citizens Financial

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

The idea behind Nordea Bank Abp and Citizens Financial Corp 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 Global Correlations module to find global opportunities by holding instruments from different markets.