Correlation Between Nordea Bank and Best Buy
Can any of the company-specific risk be diversified away by investing in both Nordea Bank and Best Buy 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 Best Buy 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 Best Buy Co, you can compare the effects of market volatilities on Nordea Bank and Best Buy 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 Best Buy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordea Bank and Best Buy.
Diversification Opportunities for Nordea Bank and Best Buy
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nordea and Best is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Nordea Bank Abp and Best Buy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy 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 Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of Nordea Bank i.e., Nordea Bank and Best Buy go up and down completely randomly.
Pair Corralation between Nordea Bank and Best Buy
Assuming the 90 days trading horizon Nordea Bank Abp is expected to generate 1.0 times more return on investment than Best Buy. However, Nordea Bank is 1.0 times more volatile than Best Buy Co. It trades about -0.06 of its potential returns per unit of risk. Best Buy Co is currently generating about -0.09 per unit of risk. If you would invest 8,180 in Nordea Bank Abp on January 20, 2024 and sell it today you would lose (190.00) from holding Nordea Bank Abp or give up 2.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Nordea Bank Abp vs. Best Buy Co
Performance |
| Timeline |
| Nordea Bank Abp |
| Best Buy |
Nordea Bank and Best Buy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nordea Bank and Best Buy
The main advantage of trading using opposite Nordea Bank and Best Buy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nordea Bank position performs unexpectedly, Best Buy 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 Best Buy will offset losses from the drop in Best Buy's long position.| Nordea Bank vs. Jyske Bank AS | Nordea Bank vs. Tryg AS | Nordea Bank vs. Danske Bank AS | Nordea Bank vs. ISS AS |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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