Correlation Between BNP Paribas and Mastrad

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

Diversification Opportunities for BNP Paribas and Mastrad

0.65

Correlation Coefficient

BNP Paribas  Mastrad

Poor diversification

The 3 months correlation between BNP and Mastrad is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding BNP Paribas SA and Mastrad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastrad 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 Mastrad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mastrad has no effect on the direction of BNP Paribas i.e., BNP Paribas and Mastrad go up and down completely randomly.

Pair Corralation between BNP Paribas and Mastrad

Assuming the 90 days trading horizon BNP Paribas is expected to generate 8.27 times less return on investment than Mastrad. But when comparing it to its historical volatility, BNP Paribas SA is 15.43 times less risky than Mastrad. It trades about 0.29 of its potential returns per unit of risk. Mastrad is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  0.78  in Mastrad on December 30, 2024 and sell it today you would earn a total of  1.44  from holding Mastrad or generate 184.62% return on investment over 90 days.

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

BNP Paribas SA  vs.  Mastrad

BNP Paribas SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BNP Paribas SA are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BNP Paribas sustained solid returns over the last few months and may actually be approaching a breakup point.

Mastrad

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mastrad are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Mastrad reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BNP Paribas and Mastrad

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

The idea behind BNP Paribas SA and Mastrad 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 Stocks Directory module to find actively traded stocks across global markets.