Correlation Between Metso Oyj and Nordea Bank
Can any of the company-specific risk be diversified away by investing in both Metso Oyj 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 Metso Oyj and Nordea Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metso Oyj and Nordea Bank Abp, you can compare the effects of market volatilities on Metso Oyj 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 Metso Oyj with a short position of Nordea Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metso Oyj and Nordea Bank.
Diversification Opportunities for Metso Oyj and Nordea Bank
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Metso and Nordea is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Metso Oyj 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 Metso Oyj 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 Metso Oyj 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 Metso Oyj i.e., Metso Oyj and Nordea Bank go up and down completely randomly.
Pair Corralation between Metso Oyj and Nordea Bank
Assuming the 90 days trading horizon Metso Oyj is expected to generate 1.76 times more return on investment than Nordea Bank. However, Metso Oyj is 1.76 times more volatile than Nordea Bank Abp. It trades about 0.08 of its potential returns per unit of risk. Nordea Bank Abp is currently generating about 0.0 per unit of risk. If you would invest 880.00 in Metso Oyj on September 12, 2024 and sell it today you would earn a total of 27.00 from holding Metso Oyj or generate 3.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Metso Oyj vs. Nordea Bank Abp
Performance |
| Timeline |
| Metso Oyj |
| Nordea Bank Abp |
Metso Oyj and Nordea Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metso Oyj and Nordea Bank
The main advantage of trading using opposite Metso Oyj and Nordea Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metso Oyj 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 Metso Oyj 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. Sampo Oyj A | Nordea Bank vs. Fortum Oyj | Nordea Bank vs. UPM Kymmene Oyj | Nordea Bank vs. Neste Oil Oyj |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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