Correlation Between BNP Paribas and Société Générale

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

Diversification Opportunities for BNP Paribas and Société Générale

-0.07

Correlation Coefficient

BNP Paribas  Société Générale

Good diversification

The 3 months correlation between BNP and Société is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding BNP Paribas SA and Socit Gnrale Socit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Socit Gnrale Socit 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 Société Générale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Socit Gnrale Socit has no effect on the direction of BNP Paribas i.e., BNP Paribas and Société Générale go up and down completely randomly.

Pair Corralation between BNP Paribas and Société Générale

Assuming the 90 days trading horizon BNP Paribas SA is expected to under-perform the Société Générale. But the stock apears to be less risky and, when comparing its historical volatility, BNP Paribas SA is 1.55 times less risky than Société Générale. The stock trades about -0.06 of its potential returns per unit of risk. The Socit Gnrale Socit is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,393  in Socit Gnrale Socit on October 22, 2024 and sell it today you would earn a total of  481.00  from holding Socit Gnrale Socit or generate 20.1% return on investment over 90 days.

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

BNP Paribas SA  vs.  Socit Gnrale Socit

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. In spite of comparatively stable basic indicators, BNP Paribas is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Socit Gnrale Socit

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Socit Gnrale Socit are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Société Générale unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BNP Paribas and Société Générale

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

The idea behind BNP Paribas SA and Socit Gnrale Socit 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.