Correlation Between Pareto Bank and Petronor
Can any of the company-specific risk be diversified away by investing in both Pareto Bank and Petronor 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 Pareto Bank and Petronor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pareto Bank ASA and Petronor EP, you can compare the effects of market volatilities on Pareto Bank and Petronor 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 Pareto Bank with a short position of Petronor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pareto Bank and Petronor.
Diversification Opportunities for Pareto Bank and Petronor
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Pareto and Petronor is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Pareto Bank ASA and Petronor EP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petronor EP and Pareto 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 Pareto Bank ASA are associated (or correlated) with Petronor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petronor EP has no effect on the direction of Pareto Bank i.e., Pareto Bank and Petronor go up and down completely randomly.
Pair Corralation between Pareto Bank and Petronor
Assuming the 90 days trading horizon Pareto Bank ASA is expected to generate 0.52 times more return on investment than Petronor. However, Pareto Bank ASA is 1.93 times less risky than Petronor. It trades about -0.11 of its potential returns per unit of risk. Petronor EP is currently generating about -0.31 per unit of risk. If you would invest 7,620 in Pareto Bank ASA on December 10, 2024 and sell it today you would lose (210.00) from holding Pareto Bank ASA or give up 2.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pareto Bank ASA vs. Petronor EP
Performance |
| Timeline |
| Pareto Bank ASA |
| Petronor EP |
Pareto Bank and Petronor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pareto Bank and Petronor
The main advantage of trading using opposite Pareto Bank and Petronor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pareto Bank position performs unexpectedly, Petronor 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 Petronor will offset losses from the drop in Petronor's long position.| Pareto Bank vs. Sparebank 1 SMN | ||
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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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