Correlation Between BNP Paribas and Bank of San Francisco

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

Diversification Opportunities for BNP Paribas and Bank of San Francisco

-0.41

Correlation Coefficient

BNP Paribas  Bank of San Francisco

Very good diversification

The 3 months correlation between BNP and Bank is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding BNP Paribas SA and Bank of San in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of San Francisco 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 Bank of San Francisco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of San Francisco has no effect on the direction of BNP Paribas i.e., BNP Paribas and Bank of San Francisco go up and down completely randomly.

Pair Corralation between BNP Paribas and Bank of San Francisco

Assuming the 90 days horizon BNP Paribas SA is expected to generate 1.4 times more return on investment than Bank of San Francisco. However, BNP Paribas is 1.4 times more volatile than Bank of San. It trades about 0.33 of its potential returns per unit of risk. Bank of San is currently generating about -0.05 per unit of risk. If you would invest  3,050  in BNP Paribas SA on December 27, 2024 and sell it today you would earn a total of  1,255  from holding BNP Paribas SA or generate 41.15% return on investment over 90 days.

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

BNP Paribas SA  vs.  Bank of San

BNP Paribas SA

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in BNP Paribas SA are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, BNP Paribas showed solid returns over the last few months and may actually be approaching a breakup point.

Bank of San Francisco

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank of San has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Bank of San Francisco is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BNP Paribas and Bank of San Francisco

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

The idea behind BNP Paribas SA and Bank of San 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..