Correlation Between Embassy Bancorp and Nordea Bank

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

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

Diversification Opportunities for Embassy Bancorp and Nordea Bank

-0.46

Correlation Coefficient

Embassy Bancorp  Nordea Bank

Very good diversification

The 3 months correlation between Embassy and Nordea is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Embassy Bancorp 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 Embassy Bancorp 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 Embassy Bancorp 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 Embassy Bancorp i.e., Embassy Bancorp and Nordea Bank go up and down completely randomly.

Pair Corralation between Embassy Bancorp and Nordea Bank

Given the investment horizon of 90 days Embassy Bancorp is expected to generate 0.39 times more return on investment than Nordea Bank. However, Embassy Bancorp is 2.59 times less risky than Nordea Bank. It trades about 0.18 of its potential returns per unit of risk. Nordea Bank Abp is currently generating about -0.02 per unit of risk. If you would invest  1,550  in Embassy Bancorp on September 4, 2024 and sell it today you would earn a total of  95.00  from holding Embassy Bancorp or generate 6.13% return on investment over 90 days.

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

Embassy Bancorp  vs.  Nordea Bank Abp

Embassy Bancorp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Embassy Bancorp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Embassy Bancorp 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

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 fairly strong fundamental drivers, Nordea Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Embassy Bancorp and Nordea Bank

The main advantage of trading using opposite Embassy Bancorp and Nordea Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Embassy Bancorp 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 Embassy Bancorp 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.