Correlation Between Nordea Bank and Oma Saastopankki

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

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

Diversification Opportunities for Nordea Bank and Oma Saastopankki

-0.44

Correlation Coefficient

Nordea Bank  Oma Saastopankki

Very good diversification

The 3 months correlation between Nordea and Oma is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Nordea Bank Abp and Oma Saastopankki Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oma Saastopankki Oyj and Nordea Bank 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 Nordea Bank Abp are associated (or correlated) with Oma Saastopankki. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oma Saastopankki Oyj has no effect on the direction of Nordea Bank i.e., Nordea Bank and Oma Saastopankki go up and down completely randomly.

Pair Corralation between Nordea Bank and Oma Saastopankki

Assuming the 90 days trading horizon Nordea Bank Abp is expected to generate 0.54 times more return on investment than Oma Saastopankki. However, Nordea Bank Abp is 1.86 times less risky than Oma Saastopankki. It trades about 0.04 of its potential returns per unit of risk. Oma Saastopankki Oyj is currently generating about -0.15 per unit of risk. If you would invest  1,038  in Nordea Bank Abp on September 16, 2024 and sell it today you would earn a total of  31.00  from holding Nordea Bank Abp or generate 2.99% return on investment over 90 days.

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

Nordea Bank Abp  vs.  Oma Saastopankki Oyj

Nordea Bank Abp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nordea Bank Abp are ranked lower than 3 (%) 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 recent stock price disturbance, may contribute to short-term losses for the investors.

Oma Saastopankki Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oma Saastopankki Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Nordea Bank and Oma Saastopankki

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

The idea behind Nordea Bank Abp and Oma Saastopankki Oyj 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.