Correlation Between Helgeland Sparebank and Pareto Bank

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

Diversification Opportunities for Helgeland Sparebank and Pareto Bank

0.21

Correlation Coefficient

Helgeland Sparebank  Pareto Bank

Modest diversification

The 3 months correlation between Helgeland and Pareto is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Helgeland Sparebank 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 Helgeland 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 Helgeland Sparebank 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 Helgeland Sparebank i.e., Helgeland Sparebank and Pareto Bank go up and down completely randomly.

Pair Corralation between Helgeland Sparebank and Pareto Bank

Assuming the 90 days trading horizon Helgeland Sparebank is expected to generate 1.0 times less return on investment than Pareto Bank. In addition to that, Helgeland Sparebank is 1.39 times more volatile than Pareto Bank ASA. It trades about 0.06 of its total potential returns per unit of risk. Pareto Bank ASA is currently generating about 0.09 per unit of volatility. If you would invest  5,830  in Pareto Bank ASA on September 13, 2024 and sell it today you would earn a total of  780.00  from holding Pareto Bank ASA or generate 13.38% return on investment over 90 days.

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

Helgeland Sparebank  vs.  Pareto Bank ASA

Helgeland Sparebank

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Helgeland Sparebank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Helgeland Sparebank 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 Helgeland Sparebank and Pareto Bank

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

The idea behind Helgeland Sparebank 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.