Correlation Between Europris ASA and Pareto Bank

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

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

Diversification Opportunities for Europris ASA and Pareto Bank

-0.14

Correlation Coefficient

Europris ASA  Pareto Bank

Good diversification

The 3 months correlation between Europris and Pareto is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Europris ASA 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 Europris ASA 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 Europris ASA 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 Europris ASA i.e., Europris ASA and Pareto Bank go up and down completely randomly.

Pair Corralation between Europris ASA and Pareto Bank

Assuming the 90 days trading horizon Europris ASA is expected to generate 2.5 times less return on investment than Pareto Bank. In addition to that, Europris ASA is 1.22 times more volatile than Pareto Bank ASA. It trades about 0.03 of its total potential returns per unit of risk. Pareto Bank ASA is currently generating about 0.08 per unit of volatility. If you would invest  4,191  in Pareto Bank ASA on September 18, 2024 and sell it today you would earn a total of  2,409  from holding Pareto Bank ASA or generate 57.48% return on investment over 90 days.

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

Europris ASA  vs.  Pareto Bank ASA

Europris ASA

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Europris ASA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Europris ASA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pareto Bank ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pareto Bank ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Pareto Bank is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Europris ASA and Pareto Bank

The main advantage of trading using opposite Europris ASA and Pareto Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Europris ASA 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.

The idea behind Europris ASA and Pareto Bank ASA 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.