Correlation Between Nordea Bank and Metso Oyj
Can any of the company-specific risk be diversified away by investing in both Nordea Bank and Metso 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 Metso 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 Metso Oyj, you can compare the effects of market volatilities on Nordea Bank and Metso 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 Metso Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordea Bank and Metso Oyj.
Diversification Opportunities for Nordea Bank and Metso Oyj
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Nordea and Metso is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Nordea Bank Abp and Metso Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metso 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 Metso Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metso Oyj has no effect on the direction of Nordea Bank i.e., Nordea Bank and Metso Oyj go up and down completely randomly.
Pair Corralation between Nordea Bank and Metso Oyj
Assuming the 90 days trading horizon Nordea Bank Abp is expected to under-perform the Metso Oyj. But the stock apears to be less risky and, when comparing its historical volatility, Nordea Bank Abp is 1.76 times less risky than Metso Oyj. The stock trades about 0.0 of its potential returns per unit of risk. The Metso Oyj is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 880.00 in Metso Oyj on September 12, 2024 and sell it today you would earn a total of 27.00 from holding Metso Oyj or generate 3.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Nordea Bank Abp vs. Metso Oyj
Performance |
| Timeline |
| Nordea Bank Abp |
| Metso Oyj |
Nordea Bank and Metso Oyj Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nordea Bank and Metso Oyj
The main advantage of trading using opposite Nordea Bank and Metso Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nordea Bank position performs unexpectedly, Metso 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 Metso Oyj will offset losses from the drop in Metso 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 |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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