Correlation Between BNP Paribas and Southeastern Banking

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

Diversification Opportunities for BNP Paribas and Southeastern Banking

-0.63

Correlation Coefficient

BNP Paribas  Southeastern Banking

Excellent diversification

The 3 months correlation between BNP and Southeastern is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding BNP Paribas SA and Southeastern Banking Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southeastern Banking Corp 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 Southeastern Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southeastern Banking Corp has no effect on the direction of BNP Paribas i.e., BNP Paribas and Southeastern Banking go up and down completely randomly.

Pair Corralation between BNP Paribas and Southeastern Banking

Assuming the 90 days horizon BNP Paribas SA is expected to generate 1.47 times more return on investment than Southeastern Banking. However, BNP Paribas is 1.47 times more volatile than Southeastern Banking Corp. It trades about 0.25 of its potential returns per unit of risk. Southeastern Banking Corp is currently generating about -0.09 per unit of risk. If you would invest  6,015  in BNP Paribas SA on December 29, 2024 and sell it today you would earn a total of  2,310  from holding BNP Paribas SA or generate 38.4% return on investment over 90 days.

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

BNP Paribas SA  vs.  Southeastern Banking Corp

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 19 (%) 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.

Southeastern Banking Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Southeastern Banking Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with BNP Paribas and Southeastern Banking

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

The idea behind BNP Paribas SA and Southeastern Banking Corp 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.