Correlation Between Apple and BNP PARIBAS

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

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

Diversification Opportunities for Apple and BNP PARIBAS

-0.61

Correlation Coefficient

Apple  BNP PARIBAS

Excellent diversification

The 3 months correlation between Apple and BNP is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and BNP PARIBAS ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNP PARIBAS ADR and Apple 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 Apple Inc are associated (or correlated) with BNP PARIBAS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BNP PARIBAS ADR has no effect on the direction of Apple i.e., Apple and BNP PARIBAS go up and down completely randomly.

Pair Corralation between Apple and BNP PARIBAS

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.86 times more return on investment than BNP PARIBAS. However, Apple Inc is 1.17 times less risky than BNP PARIBAS. It trades about 0.1 of its potential returns per unit of risk. BNP PARIBAS ADR is currently generating about 0.04 per unit of risk. If you would invest  11,897  in Apple Inc on September 18, 2024 and sell it today you would earn a total of  11,898  from holding Apple Inc or generate 100.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Apple Inc  vs.  BNP PARIBAS ADR

Apple Inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Apple sustained solid returns over the last few months and may actually be approaching a breakup point.

BNP PARIBAS ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BNP PARIBAS ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Apple and BNP PARIBAS

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

The idea behind Apple Inc and BNP PARIBAS ADR 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.