Correlation Between BNP Paribas and DBS Group

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

Diversification Opportunities for BNP Paribas and DBS Group

-0.74

Correlation Coefficient

BNP Paribas  DBS Group

Pay attention - limited upside

The 3 months correlation between BNP and DBS is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding BNP Paribas SA and DBS Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DBS Group Holdings 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 DBS Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DBS Group Holdings has no effect on the direction of BNP Paribas i.e., BNP Paribas and DBS Group go up and down completely randomly.

Pair Corralation between BNP Paribas and DBS Group

Assuming the 90 days horizon BNP Paribas is expected to generate 1.06 times less return on investment than DBS Group. In addition to that, BNP Paribas is 1.57 times more volatile than DBS Group Holdings. It trades about 0.03 of its total potential returns per unit of risk. DBS Group Holdings is currently generating about 0.05 per unit of volatility. If you would invest  2,023  in DBS Group Holdings on September 21, 2024 and sell it today you would earn a total of  1,261  from holding DBS Group Holdings or generate 62.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	86.67%
Values	Daily Returns

BNP Paribas SA  vs.  DBS Group Holdings

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

DBS Group Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DBS Group Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, DBS Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BNP Paribas and DBS Group

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

The idea behind BNP Paribas SA and DBS Group Holdings 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.