Correlation Between BNP Paribas and Lyxor 1

Can any of the company-specific risk be diversified away by investing in both BNP Paribas and Lyxor 1 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 BNP Paribas and Lyxor 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BNP Paribas Midcap and Lyxor 1 , you can compare the effects of market volatilities on BNP Paribas and Lyxor 1 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 BNP Paribas with a short position of Lyxor 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of BNP Paribas and Lyxor 1.

Diversification Opportunities for BNP Paribas and Lyxor 1

-0.46

Correlation Coefficient

BNP Paribas  Lyxor 1

Very good diversification

The 3 months correlation between BNP and Lyxor is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding BNP Paribas Midcap and Lyxor 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor 1 and BNP Paribas 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 BNP Paribas Midcap are associated (or correlated) with Lyxor 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor 1 has no effect on the direction of BNP Paribas i.e., BNP Paribas and Lyxor 1 go up and down completely randomly.

Pair Corralation between BNP Paribas and Lyxor 1

Assuming the 90 days trading horizon BNP Paribas Midcap is expected to under-perform the Lyxor 1. In addition to that, BNP Paribas is 1.07 times more volatile than Lyxor 1 . It trades about -0.17 of its total potential returns per unit of risk. Lyxor 1 is currently generating about 0.08 per unit of volatility. If you would invest  2,456  in Lyxor 1 on September 23, 2024 and sell it today you would earn a total of  29.00  from holding Lyxor 1 or generate 1.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

BNP Paribas Midcap  vs.  Lyxor 1

BNP Paribas Midcap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BNP Paribas Midcap has generated negative risk-adjusted returns adding no value to fund investors. Despite latest weak performance, the Fund's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the fund traders.

Lyxor 1

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor 1 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Lyxor 1 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BNP Paribas and Lyxor 1

The main advantage of trading using opposite BNP Paribas and Lyxor 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BNP Paribas position performs unexpectedly, Lyxor 1 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 Lyxor 1 will offset losses from the drop in Lyxor 1's long position.

The idea behind BNP Paribas Midcap and Lyxor 1 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.