Correlation Between Investor and Nordea Bank

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

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

Diversification Opportunities for Investor and Nordea Bank

-0.29

Correlation Coefficient

Investor  Nordea Bank

Very good diversification

The 3 months correlation between Investor and Nordea is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Investor AB ser 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 Investor 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 Investor AB ser 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 Investor i.e., Investor and Nordea Bank go up and down completely randomly.

Pair Corralation between Investor and Nordea Bank

Assuming the 90 days trading horizon Investor AB ser is expected to under-perform the Nordea Bank. But the stock apears to be less risky and, when comparing its historical volatility, Investor AB ser is 1.54 times less risky than Nordea Bank. The stock trades about -0.01 of its potential returns per unit of risk. The Nordea Bank Abp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  11,765  in Nordea Bank Abp on September 13, 2024 and sell it today you would earn a total of  545.00  from holding Nordea Bank Abp or generate 4.63% return on investment over 90 days.

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

Investor AB ser  vs.  Nordea Bank Abp

Investor AB ser

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investor AB ser has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Investor 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

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nordea Bank Abp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Nordea Bank is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Investor and Nordea Bank

The main advantage of trading using opposite Investor and Nordea Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investor 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 Investor AB ser 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.

Check out your portfolio center.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.