Correlation Between Tompkins Financial and Nordea Bank

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

By analyzing existing cross correlation between Tompkins Financial and Nordea Bank Abp, you can compare the effects of market volatilities on Tompkins Financial and Nordea Bank 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 Tompkins Financial with a short position of Nordea Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tompkins Financial and Nordea Bank.

Diversification Opportunities for Tompkins Financial and Nordea Bank

-0.52

Correlation Coefficient

Tompkins Financial  Nordea Bank

Excellent diversification

The 3 months correlation between Tompkins and Nordea is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Tompkins Financial and Nordea Bank Abp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordea Bank Abp and Tompkins Financial 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 Tompkins Financial are associated (or correlated) with Nordea Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordea Bank Abp has no effect on the direction of Tompkins Financial i.e., Tompkins Financial and Nordea Bank go up and down completely randomly.

Pair Corralation between Tompkins Financial and Nordea Bank

Considering the 90-day investment horizon Tompkins Financial is expected to under-perform the Nordea Bank. In addition to that, Tompkins Financial is 1.8 times more volatile than Nordea Bank Abp. It trades about -0.2 of its total potential returns per unit of risk. Nordea Bank Abp is currently generating about -0.11 per unit of volatility. If you would invest  1,139  in Nordea Bank Abp on September 20, 2024 and sell it today you would lose (29.00) from holding Nordea Bank Abp or give up 2.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Tompkins Financial  vs.  Nordea Bank Abp

Tompkins Financial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tompkins Financial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady primary indicators, Tompkins Financial reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Tompkins Financial and Nordea Bank

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

The idea behind Tompkins Financial and Nordea Bank Abp 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.