Correlation Between BNP PARIBAS and OTP Bank

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

By analyzing existing cross correlation between BNP PARIBAS ADR and OTP Bank Nyrt, you can compare the effects of market volatilities on BNP PARIBAS and OTP Bank 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 OTP Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of BNP PARIBAS and OTP Bank.

Diversification Opportunities for BNP PARIBAS and OTP Bank

0.89

Correlation Coefficient

BNP PARIBAS  OTP Bank

Very poor diversification

The 3 months correlation between BNP and OTP is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding BNP PARIBAS ADR and OTP Bank Nyrt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OTP Bank Nyrt 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 ADR are associated (or correlated) with OTP Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OTP Bank Nyrt has no effect on the direction of BNP PARIBAS i.e., BNP PARIBAS and OTP Bank go up and down completely randomly.

Pair Corralation between BNP PARIBAS and OTP Bank

Assuming the 90 days trading horizon BNP PARIBAS ADR is expected to generate 0.89 times more return on investment than OTP Bank. However, BNP PARIBAS ADR is 1.12 times less risky than OTP Bank. It trades about 0.32 of its potential returns per unit of risk. OTP Bank Nyrt is currently generating about 0.19 per unit of risk. If you would invest  2,860  in BNP PARIBAS ADR on December 19, 2024 and sell it today you would earn a total of  1,000.00  from holding BNP PARIBAS ADR or generate 34.97% return on investment over 90 days.

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

BNP PARIBAS ADR  vs.  OTP Bank Nyrt

BNP PARIBAS ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BNP PARIBAS ADR are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BNP PARIBAS reported solid returns over the last few months and may actually be approaching a breakup point.

OTP Bank Nyrt

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in OTP Bank Nyrt are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, OTP Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BNP PARIBAS and OTP Bank

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

The idea behind BNP PARIBAS ADR and OTP Bank Nyrt 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.