Correlation Between Nordea Bank and Indutrade

Can any of the company-specific risk be diversified away by investing in both Nordea Bank and Indutrade 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 Indutrade 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 Indutrade AB, you can compare the effects of market volatilities on Nordea Bank and Indutrade 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 Indutrade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordea Bank and Indutrade.

Diversification Opportunities for Nordea Bank and Indutrade

-0.58

Correlation Coefficient

Nordea Bank  Indutrade

Excellent diversification

The 3 months correlation between Nordea and Indutrade is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Nordea Bank Abp and Indutrade AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indutrade AB 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 Indutrade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indutrade AB has no effect on the direction of Nordea Bank i.e., Nordea Bank and Indutrade go up and down completely randomly.

Pair Corralation between Nordea Bank and Indutrade

Assuming the 90 days trading horizon Nordea Bank Abp is expected to generate 0.75 times more return on investment than Indutrade. However, Nordea Bank Abp is 1.33 times less risky than Indutrade. It trades about -0.01 of its potential returns per unit of risk. Indutrade AB is currently generating about -0.12 per unit of risk. If you would invest  12,505  in Nordea Bank Abp on September 12, 2024 and sell it today you would lose (55.00) from holding Nordea Bank Abp or give up 0.44% of portfolio value over 90 days.

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

Nordea Bank Abp  vs.  Indutrade AB

Nordea Bank Abp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nordea Bank Abp are ranked lower than 5 (%) 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.

Indutrade AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indutrade AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Indutrade is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Nordea Bank and Indutrade

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

The idea behind Nordea Bank Abp and Indutrade AB 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.