Correlation Between BNP Paribas and IShares MSCI

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

By analyzing existing cross correlation between BNP Paribas Easy and iShares MSCI USA, you can compare the effects of market volatilities on BNP Paribas and IShares MSCI 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 IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of BNP Paribas and IShares MSCI.

Diversification Opportunities for BNP Paribas and IShares MSCI

0.96

Correlation Coefficient

BNP Paribas  IShares MSCI

Almost no diversification

The 3 months correlation between BNP and IShares is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding BNP Paribas Easy and iShares MSCI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI USA 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 Easy are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI USA has no effect on the direction of BNP Paribas i.e., BNP Paribas and IShares MSCI go up and down completely randomly.

Pair Corralation between BNP Paribas and IShares MSCI

Assuming the 90 days trading horizon BNP Paribas Easy is expected to generate 0.92 times more return on investment than IShares MSCI. However, BNP Paribas Easy is 1.09 times less risky than IShares MSCI. It trades about -0.05 of its potential returns per unit of risk. iShares MSCI USA is currently generating about -0.08 per unit of risk. If you would invest  1,937  in BNP Paribas Easy on December 29, 2024 and sell it today you would lose (71.00) from holding BNP Paribas Easy or give up 3.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.46%
Values	Daily Returns

BNP Paribas Easy  vs.  iShares MSCI USA

BNP Paribas Easy

Risk-Adjusted Performance

Very Weak

Over the last 90 days BNP Paribas Easy has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

iShares MSCI USA

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares MSCI USA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares MSCI is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with BNP Paribas and IShares MSCI

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

The idea behind BNP Paribas Easy and iShares MSCI USA 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.

Check out your portfolio center.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.