Correlation Between Skanska AB and Nordea Bank
Can any of the company-specific risk be diversified away by investing in both Skanska AB and Nordea Bank 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 Skanska AB and Nordea Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Skanska AB and Nordea Bank Abp, you can compare the effects of market volatilities on Skanska AB and Nordea Bank 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 Skanska AB with a short position of Nordea Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Skanska AB and Nordea Bank.
Diversification Opportunities for Skanska AB and Nordea Bank
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Skanska and Nordea is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Skanska AB and Nordea Bank Abp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordea Bank Abp and Skanska AB 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 Skanska AB are associated (or correlated) with Nordea Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordea Bank Abp has no effect on the direction of Skanska AB i.e., Skanska AB and Nordea Bank go up and down completely randomly.
Pair Corralation between Skanska AB and Nordea Bank
Assuming the 90 days trading horizon Skanska AB is expected to generate 1.38 times more return on investment than Nordea Bank. However, Skanska AB is 1.38 times more volatile than Nordea Bank Abp. It trades about 0.07 of its potential returns per unit of risk. Nordea Bank Abp is currently generating about 0.04 per unit of risk. If you would invest 15,792 in Skanska AB on August 26, 2024 and sell it today you would earn a total of 6,248 from holding Skanska AB or generate 39.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Skanska AB vs. Nordea Bank Abp
Performance |
| Timeline |
| Skanska AB |
| Nordea Bank Abp |
Skanska AB and Nordea Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Skanska AB and Nordea Bank
The main advantage of trading using opposite Skanska AB and Nordea Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Skanska AB position performs unexpectedly, Nordea Bank 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 Nordea Bank will offset losses from the drop in Nordea Bank's long position.The idea behind Skanska AB and Nordea Bank Abp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Nordea Bank vs. Skandinaviska Enskilda Banken | Nordea Bank vs. Skandinaviska Enskilda Banken | Nordea Bank vs. Swedbank AB | Nordea Bank vs. TF Bank AB |
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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