Correlation Between TF Bank and New Nordic

Can any of the company-specific risk be diversified away by investing in both TF Bank and New Nordic 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 TF Bank and New Nordic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TF Bank AB and New Nordic Healthbrands, you can compare the effects of market volatilities on TF Bank and New Nordic 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 TF Bank with a short position of New Nordic. Check out your portfolio center. Please also check ongoing floating volatility patterns of TF Bank and New Nordic.

Diversification Opportunities for TF Bank and New Nordic

0.3

Correlation Coefficient

TF Bank  New Nordic

Weak diversification

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

Pair Corralation between TF Bank and New Nordic

Assuming the 90 days trading horizon TF Bank AB is expected to generate 1.14 times more return on investment than New Nordic. However, TF Bank is 1.14 times more volatile than New Nordic Healthbrands. It trades about -0.04 of its potential returns per unit of risk. New Nordic Healthbrands is currently generating about -0.04 per unit of risk. If you would invest  36,500  in TF Bank AB on December 30, 2024 and sell it today you would lose (2,800) from holding TF Bank AB or give up 7.67% of portfolio value over 90 days.

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

TF Bank AB  vs.  New Nordic Healthbrands

TF Bank AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days TF Bank AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, TF Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

New Nordic Healthbrands

Risk-Adjusted Performance

Very Weak

Over the last 90 days New Nordic Healthbrands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical indicators, New Nordic 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 TF Bank and New Nordic

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

The idea behind TF Bank AB and New Nordic Healthbrands 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.