Correlation Between BNP Paribas and Renault SA

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

Diversification Opportunities for BNP Paribas and Renault SA

0.19

Correlation Coefficient

BNP Paribas  Renault SA

Average diversification

The 3 months correlation between BNP and Renault is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding BNP Paribas SA and Renault SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renault 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 Renault SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renault SA has no effect on the direction of BNP Paribas i.e., BNP Paribas and Renault SA go up and down completely randomly.

Pair Corralation between BNP Paribas and Renault SA

Assuming the 90 days trading horizon BNP Paribas is expected to generate 3.23 times less return on investment than Renault SA. But when comparing it to its historical volatility, BNP Paribas SA is 1.3 times less risky than Renault SA. It trades about 0.02 of its potential returns per unit of risk. Renault SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,164  in Renault SA on August 31, 2024 and sell it today you would earn a total of  889.00  from holding Renault SA or generate 28.1% return on investment over 90 days.

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

BNP Paribas SA  vs.  Renault 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 weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Renault SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Renault SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Renault SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BNP Paribas and Renault SA

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

The idea behind BNP Paribas SA and Renault 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.