Correlation Between Pareto Bank and Bergen Carbon

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

Diversification Opportunities for Pareto Bank and Bergen Carbon

-0.26

Correlation Coefficient

Pareto Bank  Bergen Carbon

Very good diversification

The 3 months correlation between Pareto and Bergen is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Pareto Bank ASA and Bergen Carbon Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bergen Carbon Solutions 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 Bergen Carbon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bergen Carbon Solutions has no effect on the direction of Pareto Bank i.e., Pareto Bank and Bergen Carbon go up and down completely randomly.

Pair Corralation between Pareto Bank and Bergen Carbon

Assuming the 90 days trading horizon Pareto Bank ASA is expected to generate 0.32 times more return on investment than Bergen Carbon. However, Pareto Bank ASA is 3.17 times less risky than Bergen Carbon. It trades about 0.24 of its potential returns per unit of risk. Bergen Carbon Solutions is currently generating about 0.03 per unit of risk. If you would invest  6,630  in Pareto Bank ASA on December 21, 2024 and sell it today you would earn a total of  1,230  from holding Pareto Bank ASA or generate 18.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Pareto Bank ASA  vs.  Bergen Carbon Solutions

Pareto Bank ASA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pareto Bank ASA are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Pareto Bank disclosed solid returns over the last few months and may actually be approaching a breakup point.

Bergen Carbon Solutions

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bergen Carbon Solutions are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Bergen Carbon may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Pareto Bank and Bergen Carbon

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

The idea behind Pareto Bank ASA and Bergen Carbon Solutions 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.

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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.