Correlation Between Nordea Bank and RIAS AS
Can any of the company-specific risk be diversified away by investing in both Nordea Bank and RIAS AS 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 RIAS AS 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 RIAS AS, you can compare the effects of market volatilities on Nordea Bank and RIAS AS 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 RIAS AS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordea Bank and RIAS AS.
Diversification Opportunities for Nordea Bank and RIAS AS
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nordea and RIAS is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Nordea Bank Abp and RIAS AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RIAS 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 RIAS AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RIAS AS has no effect on the direction of Nordea Bank i.e., Nordea Bank and RIAS AS go up and down completely randomly.
Pair Corralation between Nordea Bank and RIAS AS
Assuming the 90 days trading horizon Nordea Bank Abp is expected to under-perform the RIAS AS. But the stock apears to be less risky and, when comparing its historical volatility, Nordea Bank Abp is 1.48 times less risky than RIAS AS. The stock trades about -0.03 of its potential returns per unit of risk. The RIAS AS is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 65,500 in RIAS AS on September 3, 2024 and sell it today you would lose (3,000) from holding RIAS AS or give up 4.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nordea Bank Abp vs. RIAS AS
Performance |
| Timeline |
| Nordea Bank Abp |
| RIAS AS |
Nordea Bank and RIAS AS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nordea Bank and RIAS AS
The main advantage of trading using opposite Nordea Bank and RIAS AS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nordea Bank position performs unexpectedly, RIAS AS 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 RIAS AS will offset losses from the drop in RIAS AS'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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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