Correlation Between Sotkamo Silver and Nordea Bank
Can any of the company-specific risk be diversified away by investing in both Sotkamo Silver 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 Sotkamo Silver and Nordea Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sotkamo Silver AB and Nordea Bank Abp, you can compare the effects of market volatilities on Sotkamo Silver 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 Sotkamo Silver with a short position of Nordea Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sotkamo Silver and Nordea Bank.
Diversification Opportunities for Sotkamo Silver and Nordea Bank
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sotkamo and Nordea is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Sotkamo Silver 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 Sotkamo Silver 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 Sotkamo Silver 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 Sotkamo Silver i.e., Sotkamo Silver and Nordea Bank go up and down completely randomly.
Pair Corralation between Sotkamo Silver and Nordea Bank
Assuming the 90 days trading horizon Sotkamo Silver AB is expected to generate 3.5 times more return on investment than Nordea Bank. However, Sotkamo Silver is 3.5 times more volatile than Nordea Bank Abp. It trades about 0.06 of its potential returns per unit of risk. Nordea Bank Abp is currently generating about 0.0 per unit of risk. If you would invest 8.39 in Sotkamo Silver AB on August 29, 2024 and sell it today you would earn a total of 0.91 from holding Sotkamo Silver AB or generate 10.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sotkamo Silver AB vs. Nordea Bank Abp
Performance |
| Timeline |
| Sotkamo Silver AB |
| Nordea Bank Abp |
Sotkamo Silver and Nordea Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sotkamo Silver and Nordea Bank
The main advantage of trading using opposite Sotkamo Silver and Nordea Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sotkamo Silver 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.| Sotkamo Silver vs. Outokumpu Oyj | Sotkamo Silver vs. SSAB AB ser | Sotkamo Silver vs. Telia Company AB | Sotkamo Silver vs. Wartsila Oyj Abp |
| 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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