Correlation Between Pareto Bank and Lea Bank
Can any of the company-specific risk be diversified away by investing in both Pareto Bank and Lea 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 Pareto Bank and Lea Bank 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 Lea Bank ASA, you can compare the effects of market volatilities on Pareto Bank and Lea 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 Pareto Bank with a short position of Lea Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pareto Bank and Lea Bank.
Diversification Opportunities for Pareto Bank and Lea Bank
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Pareto and Lea is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Pareto Bank ASA and Lea Bank ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lea Bank ASA 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 Lea Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lea Bank ASA has no effect on the direction of Pareto Bank i.e., Pareto Bank and Lea Bank go up and down completely randomly.
Pair Corralation between Pareto Bank and Lea Bank
Assuming the 90 days trading horizon Pareto Bank ASA is expected to under-perform the Lea Bank. But the stock apears to be less risky and, when comparing its historical volatility, Pareto Bank ASA is 2.35 times less risky than Lea Bank. The stock trades about -0.08 of its potential returns per unit of risk. The Lea Bank ASA is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 845.00 in Lea Bank ASA on September 17, 2024 and sell it today you would earn a total of 130.00 from holding Lea Bank ASA or generate 15.38% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Pareto Bank ASA vs. Lea Bank ASA
Performance |
Timeline |
Pareto Bank ASA |
Lea Bank ASA |
Pareto Bank and Lea Bank Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Pareto Bank and Lea Bank
The main advantage of trading using opposite Pareto Bank and Lea Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pareto Bank position performs unexpectedly, Lea 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 Lea Bank will offset losses from the drop in Lea Bank's long position.Pareto Bank vs. Aurskog Sparebank | Pareto Bank vs. Helgeland Sparebank | Pareto Bank vs. Kongsberg Gruppen ASA | Pareto Bank vs. Napatech AS |
Lea Bank vs. Romerike Sparebank | Lea Bank vs. Kongsberg Gruppen ASA | Lea Bank vs. Napatech AS | Lea Bank vs. Elkem 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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