Correlation Between Pareto Bank and Waste Plastic

Can any of the company-specific risk be diversified away by investing in both Pareto Bank and Waste Plastic 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 Waste Plastic 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 Waste Plastic Upcycling, you can compare the effects of market volatilities on Pareto Bank and Waste Plastic 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 Waste Plastic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pareto Bank and Waste Plastic.

Diversification Opportunities for Pareto Bank and Waste Plastic

0.25

Correlation Coefficient

Pareto Bank  Waste Plastic

Modest diversification

The 3 months correlation between Pareto and Waste is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Pareto Bank ASA and Waste Plastic Upcycling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Plastic Upcycling 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 Waste Plastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Plastic Upcycling has no effect on the direction of Pareto Bank i.e., Pareto Bank and Waste Plastic go up and down completely randomly.

Pair Corralation between Pareto Bank and Waste Plastic

Assuming the 90 days trading horizon Pareto Bank ASA is expected to generate 0.26 times more return on investment than Waste Plastic. However, Pareto Bank ASA is 3.85 times less risky than Waste Plastic. It trades about -0.02 of its potential returns per unit of risk. Waste Plastic Upcycling is currently generating about -0.21 per unit of risk. If you would invest  6,560  in Pareto Bank ASA on September 13, 2024 and sell it today you would lose (100.00) from holding Pareto Bank ASA or give up 1.52% 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.  Waste Plastic Upcycling

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.

Waste Plastic Upcycling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Waste Plastic Upcycling has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Pareto Bank and Waste Plastic

The main advantage of trading using opposite Pareto Bank and Waste Plastic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pareto Bank position performs unexpectedly, Waste Plastic 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 Waste Plastic will offset losses from the drop in Waste Plastic's long position.

The idea behind Pareto Bank ASA and Waste Plastic Upcycling 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.