Correlation Between Lyxor CAC and BNP Paribas

Can any of the company-specific risk be diversified away by investing in both Lyxor CAC and BNP Paribas 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 Lyxor CAC and BNP Paribas into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lyxor CAC 40 and BNP Paribas Easy, you can compare the effects of market volatilities on Lyxor CAC and BNP Paribas 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 Lyxor CAC with a short position of BNP Paribas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor CAC and BNP Paribas.

Diversification Opportunities for Lyxor CAC and BNP Paribas

-0.23

Correlation Coefficient

Lyxor CAC  BNP Paribas

Very good diversification

The 3 months correlation between Lyxor and BNP is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor CAC 40 and BNP Paribas Easy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNP Paribas Easy and Lyxor CAC 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 Lyxor CAC 40 are associated (or correlated) with BNP Paribas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BNP Paribas Easy has no effect on the direction of Lyxor CAC i.e., Lyxor CAC and BNP Paribas go up and down completely randomly.

Pair Corralation between Lyxor CAC and BNP Paribas

Assuming the 90 days trading horizon Lyxor CAC 40 is expected to generate 1.1 times more return on investment than BNP Paribas. However, Lyxor CAC is 1.1 times more volatile than BNP Paribas Easy. It trades about 0.36 of its potential returns per unit of risk. BNP Paribas Easy is currently generating about 0.09 per unit of risk. If you would invest  3,498  in Lyxor CAC 40 on October 24, 2024 and sell it today you would earn a total of  232.00  from holding Lyxor CAC 40 or generate 6.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Lyxor CAC 40  vs.  BNP Paribas Easy

Lyxor CAC 40

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor CAC 40 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Lyxor CAC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BNP Paribas Easy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BNP Paribas Easy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, BNP Paribas is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lyxor CAC and BNP Paribas

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

The idea behind Lyxor CAC 40 and BNP Paribas Easy 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.