Correlation Between Sparebank and Pareto Bank
Can any of the company-specific risk be diversified away by investing in both Sparebank and Pareto 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 Sparebank and Pareto Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sparebank 1 SMN and Pareto Bank ASA, you can compare the effects of market volatilities on Sparebank and Pareto 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 Sparebank with a short position of Pareto Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparebank and Pareto Bank.
Diversification Opportunities for Sparebank and Pareto Bank
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sparebank and Pareto is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Sparebank 1 SMN and Pareto Bank ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pareto Bank ASA and Sparebank 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 Sparebank 1 SMN are associated (or correlated) with Pareto Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pareto Bank ASA has no effect on the direction of Sparebank i.e., Sparebank and Pareto Bank go up and down completely randomly.
Pair Corralation between Sparebank and Pareto Bank
Assuming the 90 days trading horizon Sparebank 1 SMN is expected to generate 0.72 times more return on investment than Pareto Bank. However, Sparebank 1 SMN is 1.4 times less risky than Pareto Bank. It trades about 0.02 of its potential returns per unit of risk. Pareto Bank ASA is currently generating about -0.1 per unit of risk. If you would invest 16,460 in Sparebank 1 SMN on August 24, 2024 and sell it today you would earn a total of 40.00 from holding Sparebank 1 SMN or generate 0.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sparebank 1 SMN vs. Pareto Bank ASA
Performance |
| Timeline |
| Sparebank 1 SMN |
| Pareto Bank ASA |
Sparebank and Pareto Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sparebank and Pareto Bank
The main advantage of trading using opposite Sparebank and Pareto Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparebank position performs unexpectedly, Pareto 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 Pareto Bank will offset losses from the drop in Pareto Bank's long position.| Sparebank vs. Sparebank 1 Nord Norge | Sparebank vs. Sparebanken Vest | Sparebank vs. Storebrand ASA | Sparebank vs. DnB ASA |
| Pareto Bank vs. Sparebank 1 SMN | Pareto Bank vs. Storebrand ASA | Pareto Bank vs. DnB ASA | Pareto Bank vs. Europris ASA |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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