Correlation Between Nordea Bank and Naked Wines
Can any of the company-specific risk be diversified away by investing in both Nordea Bank and Naked Wines 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 Naked Wines 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 Naked Wines plc, you can compare the effects of market volatilities on Nordea Bank and Naked Wines 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 Naked Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordea Bank and Naked Wines.
Diversification Opportunities for Nordea Bank and Naked Wines
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Nordea and Naked is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Nordea Bank Abp and Naked Wines plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naked Wines plc 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 Naked Wines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naked Wines plc has no effect on the direction of Nordea Bank i.e., Nordea Bank and Naked Wines go up and down completely randomly.
Pair Corralation between Nordea Bank and Naked Wines
Assuming the 90 days trading horizon Nordea Bank Abp is expected to generate 0.42 times more return on investment than Naked Wines. However, Nordea Bank Abp is 2.38 times less risky than Naked Wines. It trades about 0.04 of its potential returns per unit of risk. Naked Wines plc is currently generating about -0.05 per unit of risk. If you would invest 12,564 in Nordea Bank Abp on October 26, 2024 and sell it today you would earn a total of 661.00 from holding Nordea Bank Abp or generate 5.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nordea Bank Abp vs. Naked Wines plc
Performance |
| Timeline |
| Nordea Bank Abp |
| Naked Wines plc |
Nordea Bank and Naked Wines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nordea Bank and Naked Wines
The main advantage of trading using opposite Nordea Bank and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nordea Bank position performs unexpectedly, Naked Wines 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 Naked Wines will offset losses from the drop in Naked Wines' long position.| Nordea Bank vs. Orient Telecoms | Nordea Bank vs. Foresight Environmental Infrastructure | Nordea Bank vs. JLEN Environmental Assets | Nordea Bank vs. Charter Communications Cl |
| Naked Wines vs. Various Eateries PLC | Naked Wines vs. Nordea Bank Abp | Naked Wines vs. Ameriprise Financial | Naked Wines vs. Samsung Electronics Co |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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