Correlation Between Nordea Bank and Danske Bank

Can any of the company-specific risk be diversified away by investing in both Nordea Bank and Danske 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 Nordea Bank and Danske Bank 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 Danske Bank AS, you can compare the effects of market volatilities on Nordea Bank and Danske 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 Nordea Bank with a short position of Danske Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordea Bank and Danske Bank.

Diversification Opportunities for Nordea Bank and Danske Bank

0.87

Correlation Coefficient

Nordea Bank  Danske Bank

Very poor diversification

The 3 months correlation between Nordea and Danske is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Nordea Bank Abp and Danske Bank AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danske Bank AS 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 Danske Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danske Bank AS has no effect on the direction of Nordea Bank i.e., Nordea Bank and Danske Bank go up and down completely randomly.

Pair Corralation between Nordea Bank and Danske Bank

Assuming the 90 days trading horizon Nordea Bank Abp is expected to generate 1.5 times more return on investment than Danske Bank. However, Nordea Bank is 1.5 times more volatile than Danske Bank AS. It trades about 0.0 of its potential returns per unit of risk. Danske Bank AS is currently generating about 0.0 per unit of risk. If you would invest  9,308  in Nordea Bank Abp on April 25, 2025 and sell it today you would lose (14.00) from holding Nordea Bank Abp or give up 0.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Nordea Bank Abp  vs.  Danske Bank AS

Nordea Bank Abp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nordea Bank Abp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Nordea Bank is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Danske Bank AS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Danske Bank AS are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Danske Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nordea Bank and Danske Bank

The main advantage of trading using opposite Nordea Bank and Danske Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nordea Bank position performs unexpectedly, Danske 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 Danske Bank will offset losses from the drop in Danske Bank's long position.

The idea behind Nordea Bank Abp and Danske Bank AS 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.

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 Anywhere module to track or share privately all of your investments from the convenience of any device.