Correlation Between Nordea Bank and Lifeclean International
Can any of the company-specific risk be diversified away by investing in both Nordea Bank and Lifeclean International 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 Lifeclean International 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 Lifeclean International AB, you can compare the effects of market volatilities on Nordea Bank and Lifeclean International 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 Lifeclean International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordea Bank and Lifeclean International.
Diversification Opportunities for Nordea Bank and Lifeclean International
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Nordea and Lifeclean is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Nordea Bank Abp and Lifeclean International AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifeclean International 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 Lifeclean International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifeclean International has no effect on the direction of Nordea Bank i.e., Nordea Bank and Lifeclean International go up and down completely randomly.
Pair Corralation between Nordea Bank and Lifeclean International
Assuming the 90 days trading horizon Nordea Bank Abp is expected to generate 0.18 times more return on investment than Lifeclean International. However, Nordea Bank Abp is 5.6 times less risky than Lifeclean International. It trades about 0.09 of its potential returns per unit of risk. Lifeclean International AB is currently generating about -0.25 per unit of risk. If you would invest 11,820 in Nordea Bank Abp on September 11, 2024 and sell it today you would earn a total of 780.00 from holding Nordea Bank Abp or generate 6.6% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Nordea Bank Abp vs. Lifeclean International AB
Performance |
Timeline |
Nordea Bank Abp |
Lifeclean International |
Nordea Bank and Lifeclean International Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Nordea Bank and Lifeclean International
The main advantage of trading using opposite Nordea Bank and Lifeclean International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nordea Bank position performs unexpectedly, Lifeclean International 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 Lifeclean International will offset losses from the drop in Lifeclean International's long position.Nordea Bank vs. Skandinaviska Enskilda Banken | Nordea Bank vs. Skandinaviska Enskilda Banken | Nordea Bank vs. Swedbank AB | Nordea Bank vs. Avanza Bank Holding |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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