Correlation Between Nordea Bank and Coloplast
Can any of the company-specific risk be diversified away by investing in both Nordea Bank and Coloplast 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 Coloplast 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 Coloplast AS, you can compare the effects of market volatilities on Nordea Bank and Coloplast 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 Coloplast. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordea Bank and Coloplast.
Diversification Opportunities for Nordea Bank and Coloplast
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Nordea and Coloplast is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Nordea Bank Abp and Coloplast AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coloplast AS 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 Coloplast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coloplast AS has no effect on the direction of Nordea Bank i.e., Nordea Bank and Coloplast go up and down completely randomly.
Pair Corralation between Nordea Bank and Coloplast
Assuming the 90 days trading horizon Nordea Bank Abp is expected to generate 0.97 times more return on investment than Coloplast. However, Nordea Bank Abp is 1.03 times less risky than Coloplast. It trades about 0.03 of its potential returns per unit of risk. Coloplast AS is currently generating about 0.02 per unit of risk. If you would invest 6,919 in Nordea Bank Abp on August 24, 2024 and sell it today you would earn a total of 997.00 from holding Nordea Bank Abp or generate 14.41% 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. Coloplast AS
Performance |
| Timeline |
| Nordea Bank Abp |
| Coloplast AS |
Nordea Bank and Coloplast Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nordea Bank and Coloplast
The main advantage of trading using opposite Nordea Bank and Coloplast positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nordea Bank position performs unexpectedly, Coloplast 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 Coloplast will offset losses from the drop in Coloplast's long position.| 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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