Correlation Between Nordea Bank and Bank Leumi

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

Diversification Opportunities for Nordea Bank and Bank Leumi

-0.28

Correlation Coefficient

Nordea Bank  Bank Leumi

Very good diversification

The 3 months correlation between Nordea and Bank is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Nordea Bank Abp and Bank Leumi Le in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Leumi Le 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 Bank Leumi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Leumi Le has no effect on the direction of Nordea Bank i.e., Nordea Bank and Bank Leumi go up and down completely randomly.

Pair Corralation between Nordea Bank and Bank Leumi

Assuming the 90 days horizon Nordea Bank is expected to generate 275.56 times less return on investment than Bank Leumi. But when comparing it to its historical volatility, Nordea Bank Abp is 2.06 times less risky than Bank Leumi. It trades about 0.0 of its potential returns per unit of risk. Bank Leumi Le is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  748.00  in Bank Leumi Le on September 4, 2024 and sell it today you would earn a total of  152.00  from holding Bank Leumi Le or generate 20.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	36.84%
Values	Daily Returns

Nordea Bank Abp  vs.  Bank Leumi Le

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.

Bank Leumi Le

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Leumi Le has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Bank Leumi is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Nordea Bank and Bank Leumi

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

The idea behind Nordea Bank Abp and Bank Leumi Le 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.