Correlation Between BNP Paribas and Merchants Bancorp

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

Diversification Opportunities for BNP Paribas and Merchants Bancorp

0.0

Correlation Coefficient

BNP Paribas  Merchants Bancorp

Pay attention - limited upside

The 3 months correlation between BNP and Merchants is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding BNP Paribas SA and Merchants Bancorp PR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants Bancorp 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 Merchants Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merchants Bancorp has no effect on the direction of BNP Paribas i.e., BNP Paribas and Merchants Bancorp go up and down completely randomly.

Pair Corralation between BNP Paribas and Merchants Bancorp

Assuming the 90 days horizon BNP Paribas SA is expected to generate 0.88 times more return on investment than Merchants Bancorp. However, BNP Paribas SA is 1.13 times less risky than Merchants Bancorp. It trades about 0.02 of its potential returns per unit of risk. Merchants Bancorp PR is currently generating about -0.03 per unit of risk. If you would invest  2,906  in BNP Paribas SA on October 25, 2024 and sell it today you would earn a total of  335.00  from holding BNP Paribas SA or generate 11.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	23.94%
Values	Daily Returns

BNP Paribas SA  vs.  Merchants Bancorp PR

BNP Paribas SA

Risk-Adjusted Performance

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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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Merchants Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merchants Bancorp PR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Merchants Bancorp is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with BNP Paribas and Merchants Bancorp

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

The idea behind BNP Paribas SA and Merchants Bancorp PR 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.