Correlation Between KLP AksjeNorge and Nordea 1

Can any of the company-specific risk be diversified away by investing in both KLP AksjeNorge and Nordea 1 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 KLP AksjeNorge and Nordea 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KLP AksjeNorge Indeks and Nordea 1 , you can compare the effects of market volatilities on KLP AksjeNorge and Nordea 1 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 KLP AksjeNorge with a short position of Nordea 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of KLP AksjeNorge and Nordea 1.

Diversification Opportunities for KLP AksjeNorge and Nordea 1

0.59

Correlation Coefficient

KLP AksjeNorge  Nordea 1

Very weak diversification

The 3 months correlation between KLP and Nordea is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding KLP AksjeNorge Indeks and Nordea 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordea 1 and KLP AksjeNorge 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 KLP AksjeNorge Indeks are associated (or correlated) with Nordea 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordea 1 has no effect on the direction of KLP AksjeNorge i.e., KLP AksjeNorge and Nordea 1 go up and down completely randomly.

Pair Corralation between KLP AksjeNorge and Nordea 1

Assuming the 90 days trading horizon KLP AksjeNorge is expected to generate 2.6 times less return on investment than Nordea 1. But when comparing it to its historical volatility, KLP AksjeNorge Indeks is 1.18 times less risky than Nordea 1. It trades about 0.06 of its potential returns per unit of risk. Nordea 1 is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  38,076  in Nordea 1 on September 19, 2024 and sell it today you would earn a total of  2,608  from holding Nordea 1 or generate 6.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

KLP AksjeNorge Indeks  vs.  Nordea 1

KLP AksjeNorge Indeks

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KLP AksjeNorge Indeks are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly strong technical indicators, KLP AksjeNorge is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Nordea 1

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nordea 1 are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Nordea 1 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with KLP AksjeNorge and Nordea 1

The main advantage of trading using opposite KLP AksjeNorge and Nordea 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KLP AksjeNorge position performs unexpectedly, Nordea 1 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 1 will offset losses from the drop in Nordea 1's long position.

The idea behind KLP AksjeNorge Indeks and Nordea 1 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.