Correlation Between DNB Norge and Nordea 1

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

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

Diversification Opportunities for DNB Norge and Nordea 1

0.43

Correlation Coefficient

DNB Norge  Nordea 1

Very weak diversification

The 3 months correlation between DNB and Nordea is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding DNB Norge Selektiv and Nordea 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordea 1 and DNB Norge 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 DNB Norge Selektiv 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 DNB Norge i.e., DNB Norge and Nordea 1 go up and down completely randomly.

Pair Corralation between DNB Norge and Nordea 1

Assuming the 90 days trading horizon DNB Norge is expected to generate 1.53 times less return on investment than Nordea 1. In addition to that, DNB Norge is 1.06 times more volatile than Nordea 1 . It trades about 0.05 of its total potential returns per unit of risk. Nordea 1 is currently generating about 0.08 per unit of volatility. If you would invest  29,830  in Nordea 1 on September 19, 2024 and sell it today you would earn a total of  10,854  from holding Nordea 1 or generate 36.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

DNB Norge Selektiv  vs.  Nordea 1

DNB Norge Selektiv

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DNB Norge Selektiv are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound technical and fundamental indicators, DNB Norge is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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 DNB Norge and Nordea 1

The main advantage of trading using opposite DNB Norge and Nordea 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DNB Norge 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 DNB Norge Selektiv 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.