Correlation Between Sampo Oyj and Nordea Bank

Can any of the company-specific risk be diversified away by investing in both Sampo Oyj 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 Sampo Oyj and Nordea Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sampo Oyj A and Nordea Bank Abp, you can compare the effects of market volatilities on Sampo Oyj 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 Sampo Oyj with a short position of Nordea Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sampo Oyj and Nordea Bank.

Diversification Opportunities for Sampo Oyj and Nordea Bank

-0.03

Correlation Coefficient

Sampo Oyj  Nordea Bank

Good diversification

The 3 months correlation between Sampo and Nordea is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Sampo Oyj A 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 Sampo Oyj 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 Sampo Oyj A 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 Sampo Oyj i.e., Sampo Oyj and Nordea Bank go up and down completely randomly.

Pair Corralation between Sampo Oyj and Nordea Bank

Assuming the 90 days trading horizon Sampo Oyj is expected to generate 2.76 times less return on investment than Nordea Bank. But when comparing it to its historical volatility, Sampo Oyj A is 1.24 times less risky than Nordea Bank. It trades about 0.02 of its potential returns per unit of risk. Nordea Bank Abp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  793.00  in Nordea Bank Abp on February 6, 2024 and sell it today you would earn a total of  303.00  from holding Nordea Bank Abp or generate 38.21% return on investment over 90 days.

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

Sampo Oyj A  vs.  Nordea Bank Abp

Sampo Oyj A

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sampo Oyj A are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Sampo Oyj is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Nordea Bank Abp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nordea Bank Abp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent technical and fundamental indicators, Nordea Bank may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Sampo Oyj and Nordea Bank

The main advantage of trading using opposite Sampo Oyj and Nordea Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sampo Oyj 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 Sampo Oyj A 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.

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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.