Correlation Between Nordea Bank and Scandinavian Tobacco
Can any of the company-specific risk be diversified away by investing in both Nordea Bank and Scandinavian Tobacco 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 Scandinavian Tobacco 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 Scandinavian Tobacco Group, you can compare the effects of market volatilities on Nordea Bank and Scandinavian Tobacco 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 Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordea Bank and Scandinavian Tobacco.
Diversification Opportunities for Nordea Bank and Scandinavian Tobacco
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nordea and Scandinavian is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Nordea Bank Abp and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco 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 Scandinavian Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandinavian Tobacco has no effect on the direction of Nordea Bank i.e., Nordea Bank and Scandinavian Tobacco go up and down completely randomly.
Pair Corralation between Nordea Bank and Scandinavian Tobacco
Assuming the 90 days trading horizon Nordea Bank Abp is expected to generate 0.93 times more return on investment than Scandinavian Tobacco. However, Nordea Bank Abp is 1.07 times less risky than Scandinavian Tobacco. It trades about 0.03 of its potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about -0.02 per unit of risk. If you would invest 6,862 in Nordea Bank Abp on September 4, 2024 and sell it today you would earn a total of 1,170 from holding Nordea Bank Abp or generate 17.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nordea Bank Abp vs. Scandinavian Tobacco Group
Performance |
| Timeline |
| Nordea Bank Abp |
| Scandinavian Tobacco |
Nordea Bank and Scandinavian Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nordea Bank and Scandinavian Tobacco
The main advantage of trading using opposite Nordea Bank and Scandinavian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nordea Bank position performs unexpectedly, Scandinavian Tobacco 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 Scandinavian Tobacco will offset losses from the drop in Scandinavian Tobacco'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 |
| Scandinavian Tobacco vs. Matas AS | Scandinavian Tobacco vs. Tryg AS | Scandinavian Tobacco vs. Alm Brand | Scandinavian Tobacco vs. Royal Unibrew 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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