Correlation Between FLSmidth and Nordea Bank
Can any of the company-specific risk be diversified away by investing in both FLSmidth and Nordea Bank 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 FLSmidth and Nordea Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FLSmidth Co and Nordea Bank Abp, you can compare the effects of market volatilities on FLSmidth and Nordea Bank 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 FLSmidth with a short position of Nordea Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of FLSmidth and Nordea Bank.
Diversification Opportunities for FLSmidth and Nordea Bank
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FLSmidth and Nordea is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding FLSmidth Co and Nordea Bank Abp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordea Bank Abp and FLSmidth 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 FLSmidth Co are associated (or correlated) with Nordea Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordea Bank Abp has no effect on the direction of FLSmidth i.e., FLSmidth and Nordea Bank go up and down completely randomly.
Pair Corralation between FLSmidth and Nordea Bank
Assuming the 90 days trading horizon FLSmidth is expected to generate 1.09 times less return on investment than Nordea Bank. In addition to that, FLSmidth is 1.47 times more volatile than Nordea Bank Abp. It trades about 0.02 of its total potential returns per unit of risk. Nordea Bank Abp is currently generating about 0.03 per unit of volatility. If you would invest 7,275 in Nordea Bank Abp on January 24, 2025 and sell it today you would earn a total of 1,431 from holding Nordea Bank Abp or generate 19.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FLSmidth Co vs. Nordea Bank Abp
Performance |
| Timeline |
| FLSmidth |
| Nordea Bank Abp |
FLSmidth and Nordea Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FLSmidth and Nordea Bank
The main advantage of trading using opposite FLSmidth and Nordea Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FLSmidth position performs unexpectedly, Nordea Bank 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 Nordea Bank will offset losses from the drop in Nordea Bank's long position.The idea behind FLSmidth Co and Nordea Bank Abp 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.| Nordea Bank vs. Jyske Bank AS | Nordea Bank vs. Tryg AS | Nordea Bank vs. Danske Bank AS | Nordea Bank vs. ISS AS |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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