Correlation Between Nordea Bank and Home Federal

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

Diversification Opportunities for Nordea Bank and Home Federal

0.07

Correlation Coefficient

Nordea Bank  Home Federal

Significant diversification

The 3 months correlation between Nordea and Home is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Nordea Bank Abp and Home Federal Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Federal Bancorp 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 Home Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Federal Bancorp has no effect on the direction of Nordea Bank i.e., Nordea Bank and Home Federal go up and down completely randomly.

Pair Corralation between Nordea Bank and Home Federal

Assuming the 90 days horizon Nordea Bank is expected to generate 57.9 times less return on investment than Home Federal. But when comparing it to its historical volatility, Nordea Bank Abp is 32.09 times less risky than Home Federal. It trades about 0.02 of its potential returns per unit of risk. Home Federal Bancorp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,711  in Home Federal Bancorp on September 20, 2024 and sell it today you would lose (451.00) from holding Home Federal Bancorp or give up 26.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.51%
Values	Daily Returns

Nordea Bank Abp  vs.  Home Federal Bancorp

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.

Home Federal Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Home Federal Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Nordea Bank and Home Federal

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

The idea behind Nordea Bank Abp and Home Federal Bancorp 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.