Correlation Between Nordea Bank and Finnair Oyj
Can any of the company-specific risk be diversified away by investing in both Nordea Bank and Finnair Oyj 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 Finnair Oyj 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 Finnair Oyj, you can compare the effects of market volatilities on Nordea Bank and Finnair Oyj 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 Finnair Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordea Bank and Finnair Oyj.
Diversification Opportunities for Nordea Bank and Finnair Oyj
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Nordea and Finnair is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Nordea Bank Abp and Finnair Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finnair Oyj 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 Finnair Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finnair Oyj has no effect on the direction of Nordea Bank i.e., Nordea Bank and Finnair Oyj go up and down completely randomly.
Pair Corralation between Nordea Bank and Finnair Oyj
Assuming the 90 days trading horizon Nordea Bank is expected to generate 4.49 times less return on investment than Finnair Oyj. But when comparing it to its historical volatility, Nordea Bank Abp is 3.84 times less risky than Finnair Oyj. It trades about 0.3 of its potential returns per unit of risk. Finnair Oyj is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 251.00 in Finnair Oyj on December 1, 2024 and sell it today you would earn a total of 102.00 from holding Finnair Oyj or generate 40.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nordea Bank Abp vs. Finnair Oyj
Performance |
| Timeline |
| Nordea Bank Abp |
| Finnair Oyj |
Nordea Bank and Finnair Oyj Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nordea Bank and Finnair Oyj
The main advantage of trading using opposite Nordea Bank and Finnair Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nordea Bank position performs unexpectedly, Finnair Oyj 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 Finnair Oyj will offset losses from the drop in Finnair Oyj'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 |
| Finnair Oyj vs. Fortum Oyj | Finnair Oyj vs. Nordea Bank Abp | Finnair Oyj vs. Sampo Oyj A | Finnair Oyj 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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