Correlation Between BNP Paribas and Crdit Agricole

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

By analyzing existing cross correlation between BNP Paribas SA and Crdit Agricole SA, you can compare the effects of market volatilities on BNP Paribas and Crdit Agricole 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 Crdit Agricole. Check out your portfolio center. Please also check ongoing floating volatility patterns of BNP Paribas and Crdit Agricole.

Diversification Opportunities for BNP Paribas and Crdit Agricole

0.93

Correlation Coefficient

BNP Paribas  Crdit Agricole

Almost no diversification

The 3 months correlation between BNP and Crdit is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding BNP Paribas SA and Crdit Agricole SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crdit Agricole SA 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 SA are associated (or correlated) with Crdit Agricole. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crdit Agricole SA has no effect on the direction of BNP Paribas i.e., BNP Paribas and Crdit Agricole go up and down completely randomly.

Pair Corralation between BNP Paribas and Crdit Agricole

Assuming the 90 days horizon BNP Paribas is expected to generate 1.5 times less return on investment than Crdit Agricole. In addition to that, BNP Paribas is 1.05 times more volatile than Crdit Agricole SA. It trades about 0.03 of its total potential returns per unit of risk. Crdit Agricole SA is currently generating about 0.05 per unit of volatility. If you would invest  1,105  in Crdit Agricole SA on September 23, 2024 and sell it today you would earn a total of  184.00  from holding Crdit Agricole SA or generate 16.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

BNP Paribas SA  vs.  Crdit Agricole SA

BNP Paribas SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BNP Paribas SA 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.

Crdit Agricole SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crdit Agricole SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Crdit Agricole is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BNP Paribas and Crdit Agricole

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

The idea behind BNP Paribas SA and Crdit Agricole SA 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.