Correlation Between Napatech and Pareto Bank

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

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

Diversification Opportunities for Napatech and Pareto Bank

0.01

Correlation Coefficient

Napatech  Pareto Bank

Significant diversification

The 3 months correlation between Napatech and Pareto is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Napatech AS 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 Napatech 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 Napatech AS 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 Napatech i.e., Napatech and Pareto Bank go up and down completely randomly.

Pair Corralation between Napatech and Pareto Bank

Assuming the 90 days trading horizon Napatech AS is expected to generate 3.65 times more return on investment than Pareto Bank. However, Napatech is 3.65 times more volatile than Pareto Bank ASA. It trades about 0.06 of its potential returns per unit of risk. Pareto Bank ASA is currently generating about 0.12 per unit of risk. If you would invest  1,405  in Napatech AS on September 14, 2024 and sell it today you would earn a total of  845.00  from holding Napatech AS or generate 60.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.63%
Values	Daily Returns

Napatech AS  vs.  Pareto Bank ASA

Napatech AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Napatech AS 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 essential 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.

Pareto Bank ASA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pareto Bank ASA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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 Napatech and Pareto Bank

The main advantage of trading using opposite Napatech and Pareto Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Napatech 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 Napatech AS 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.