Correlation Between Nordea Bank and Embassy Bancorp

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

Diversification Opportunities for Nordea Bank and Embassy Bancorp

-0.44

Correlation Coefficient

Nordea Bank  Embassy Bancorp

Very good diversification

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

Pair Corralation between Nordea Bank and Embassy Bancorp

Assuming the 90 days horizon Nordea Bank Abp is expected to generate 0.62 times more return on investment than Embassy Bancorp. However, Nordea Bank Abp is 1.62 times less risky than Embassy Bancorp. It trades about 0.01 of its potential returns per unit of risk. Embassy Bancorp is currently generating about 0.0 per unit of risk. If you would invest  1,151  in Nordea Bank Abp on September 12, 2024 and sell it today you would lose (1.00) from holding Nordea Bank Abp or give up 0.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.72%
Values	Daily Returns

Nordea Bank Abp  vs.  Embassy Bancorp

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.

Embassy Bancorp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Embassy Bancorp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Embassy Bancorp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nordea Bank and Embassy Bancorp

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

The idea behind Nordea Bank Abp and Embassy Bancorp 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.