Correlation Between Nordea Bank and Valmet Oyj
Can any of the company-specific risk be diversified away by investing in both Nordea Bank and Valmet 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 Valmet 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 Valmet Oyj, you can compare the effects of market volatilities on Nordea Bank and Valmet 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 Valmet Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordea Bank and Valmet Oyj.
Diversification Opportunities for Nordea Bank and Valmet Oyj
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Nordea and Valmet is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Nordea Bank Abp and Valmet Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valmet 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 Valmet Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valmet Oyj has no effect on the direction of Nordea Bank i.e., Nordea Bank and Valmet Oyj go up and down completely randomly.
Pair Corralation between Nordea Bank and Valmet Oyj
Assuming the 90 days trading horizon Nordea Bank is expected to generate 1.37 times less return on investment than Valmet Oyj. But when comparing it to its historical volatility, Nordea Bank Abp is 1.51 times less risky than Valmet Oyj. It trades about 0.33 of its potential returns per unit of risk. Valmet Oyj is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 2,392 in Valmet Oyj on November 3, 2024 and sell it today you would earn a total of 243.00 from holding Valmet Oyj or generate 10.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nordea Bank Abp vs. Valmet Oyj
Performance |
| Timeline |
| Nordea Bank Abp |
| Valmet Oyj |
Nordea Bank and Valmet Oyj Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nordea Bank and Valmet Oyj
The main advantage of trading using opposite Nordea Bank and Valmet Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nordea Bank position performs unexpectedly, Valmet 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 Valmet Oyj will offset losses from the drop in Valmet 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 |
| Valmet Oyj vs. UPM Kymmene Oyj | Valmet Oyj vs. Wartsila Oyj Abp | Valmet Oyj vs. Sampo Oyj A | Valmet Oyj vs. Konecranes Plc |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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