Correlation Between BNP Paribas and Traditions Bank

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

Diversification Opportunities for BNP Paribas and Traditions Bank

-0.49

Correlation Coefficient

BNP Paribas  Traditions Bank

Very good diversification

The 3 months correlation between BNP and Traditions is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding BNP Paribas SA and Traditions Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Traditions Bank 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 Traditions Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Traditions Bank has no effect on the direction of BNP Paribas i.e., BNP Paribas and Traditions Bank go up and down completely randomly.

Pair Corralation between BNP Paribas and Traditions Bank

Assuming the 90 days horizon BNP Paribas SA is expected to generate 0.83 times more return on investment than Traditions Bank. However, BNP Paribas SA is 1.21 times less risky than Traditions Bank. It trades about 0.31 of its potential returns per unit of risk. Traditions Bank is currently generating about 0.09 per unit of risk. If you would invest  3,073  in BNP Paribas SA on December 29, 2024 and sell it today you would earn a total of  1,178  from holding BNP Paribas SA or generate 38.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	39.34%
Values	Daily Returns

BNP Paribas SA  vs.  Traditions Bank

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 24 (%) 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.

Traditions Bank

Risk-Adjusted Performance

OK

Over the last 90 days Traditions Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite fragile fundamental drivers, Traditions Bank disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BNP Paribas and Traditions Bank

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

The idea behind BNP Paribas SA and Traditions Bank 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.