Correlation Between Inter Cars and BNP Paribas

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

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

Diversification Opportunities for Inter Cars and BNP Paribas

0.21

Correlation Coefficient

Inter Cars  BNP Paribas

Modest diversification

The 3 months correlation between Inter and BNP is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Inter Cars SA and BNP Paribas Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNP Paribas Bank and Inter Cars 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 Inter Cars SA 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 Bank has no effect on the direction of Inter Cars i.e., Inter Cars and BNP Paribas go up and down completely randomly.

Pair Corralation between Inter Cars and BNP Paribas

Assuming the 90 days trading horizon Inter Cars SA is expected to generate 1.28 times more return on investment than BNP Paribas. However, Inter Cars is 1.28 times more volatile than BNP Paribas Bank. It trades about 0.24 of its potential returns per unit of risk. BNP Paribas Bank is currently generating about -0.24 per unit of risk. If you would invest  48,250  in Inter Cars SA on September 17, 2024 and sell it today you would earn a total of  4,250  from holding Inter Cars SA or generate 8.81% return on investment over 90 days.

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

Inter Cars SA  vs.  BNP Paribas Bank

Inter Cars SA

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Inter Cars SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Inter Cars is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

BNP Paribas Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BNP Paribas Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Inter Cars and BNP Paribas

The main advantage of trading using opposite Inter Cars and BNP Paribas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inter Cars 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 Inter Cars SA and BNP Paribas 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.