Correlation Between Nordea Bank and Telefonaktiebolaget
Can any of the company-specific risk be diversified away by investing in both Nordea Bank and Telefonaktiebolaget 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 Telefonaktiebolaget 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 Telefonaktiebolaget LM Ericsson, you can compare the effects of market volatilities on Nordea Bank and Telefonaktiebolaget 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 Telefonaktiebolaget. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordea Bank and Telefonaktiebolaget.
Diversification Opportunities for Nordea Bank and Telefonaktiebolaget
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nordea and Telefonaktiebolaget is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Nordea Bank Abp and Telefonaktiebolaget LM Ericsso in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonaktiebolaget 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 Telefonaktiebolaget. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefonaktiebolaget has no effect on the direction of Nordea Bank i.e., Nordea Bank and Telefonaktiebolaget go up and down completely randomly.
Pair Corralation between Nordea Bank and Telefonaktiebolaget
Assuming the 90 days trading horizon Nordea Bank Abp is expected to under-perform the Telefonaktiebolaget. But the stock apears to be less risky and, when comparing its historical volatility, Nordea Bank Abp is 1.13 times less risky than Telefonaktiebolaget. The stock trades about -0.13 of its potential returns per unit of risk. The Telefonaktiebolaget LM Ericsson is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 784.00 in Telefonaktiebolaget LM Ericsson on August 27, 2024 and sell it today you would lose (11.00) from holding Telefonaktiebolaget LM Ericsson or give up 1.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nordea Bank Abp vs. Telefonaktiebolaget LM Ericsso
Performance |
| Timeline |
| Nordea Bank Abp |
| Telefonaktiebolaget |
Nordea Bank and Telefonaktiebolaget Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nordea Bank and Telefonaktiebolaget
The main advantage of trading using opposite Nordea Bank and Telefonaktiebolaget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nordea Bank position performs unexpectedly, Telefonaktiebolaget 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 Telefonaktiebolaget will offset losses from the drop in Telefonaktiebolaget's long position.| Nordea Bank vs. Sampo Oyj A | Nordea Bank vs. Fortum Oyj | Nordea Bank vs. UPM Kymmene Oyj | Nordea Bank vs. Neste Oil Oyj |
| Telefonaktiebolaget vs. Telia Company AB | Telefonaktiebolaget vs. SSAB AB ser | Telefonaktiebolaget vs. Kesko Oyj | Telefonaktiebolaget vs. Stora Enso 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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