Correlation Between Train Alliance and Nordea Bank

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

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

Diversification Opportunities for Train Alliance and Nordea Bank

0.12

Correlation Coefficient

Train Alliance  Nordea Bank

Average diversification

The 3 months correlation between Train and Nordea is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Train Alliance Sweden 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 Train Alliance 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 Train Alliance Sweden 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 Train Alliance i.e., Train Alliance and Nordea Bank go up and down completely randomly.

Pair Corralation between Train Alliance and Nordea Bank

Assuming the 90 days trading horizon Train Alliance Sweden is expected to under-perform the Nordea Bank. In addition to that, Train Alliance is 1.28 times more volatile than Nordea Bank Abp. It trades about -0.01 of its total potential returns per unit of risk. Nordea Bank Abp is currently generating about 0.15 per unit of volatility. If you would invest  12,345  in Nordea Bank Abp on November 20, 2024 and sell it today you would earn a total of  1,260  from holding Nordea Bank Abp or generate 10.21% return on investment over 90 days.

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

Train Alliance Sweden  vs.  Nordea Bank Abp

Train Alliance Sweden

Risk-Adjusted Performance

Very Weak

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

Nordea Bank Abp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nordea Bank Abp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nordea Bank may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Train Alliance and Nordea Bank

The main advantage of trading using opposite Train Alliance and Nordea Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Train Alliance 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 Train Alliance Sweden 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..