Correlation Between Gold Bullion and BNPP LC

Can any of the company-specific risk be diversified away by investing in both Gold Bullion and BNPP LC 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 Gold Bullion and BNPP LC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gold Bullion Securities and BNPP LC EURPAB, you can compare the effects of market volatilities on Gold Bullion and BNPP LC 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 Gold Bullion with a short position of BNPP LC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Bullion and BNPP LC.

Diversification Opportunities for Gold Bullion and BNPP LC

0.91

Correlation Coefficient

Gold Bullion  BNPP LC

Almost no diversification

The 3 months correlation between Gold and BNPP is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Gold Bullion Securities and BNPP LC EURPAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNPP LC EURPAB and Gold Bullion 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 Gold Bullion Securities are associated (or correlated) with BNPP LC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BNPP LC EURPAB has no effect on the direction of Gold Bullion i.e., Gold Bullion and BNPP LC go up and down completely randomly.

Pair Corralation between Gold Bullion and BNPP LC

Assuming the 90 days trading horizon Gold Bullion Securities is expected to generate 1.0 times more return on investment than BNPP LC. However, Gold Bullion Securities is 1.0 times less risky than BNPP LC. It trades about 0.2 of its potential returns per unit of risk. BNPP LC EURPAB is currently generating about 0.18 per unit of risk. If you would invest  23,086  in Gold Bullion Securities on December 21, 2024 and sell it today you would earn a total of  2,594  from holding Gold Bullion Securities or generate 11.24% return on investment over 90 days.

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

Gold Bullion Securities  vs.  BNPP LC EURPAB

Gold Bullion Securities

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Bullion Securities are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gold Bullion may actually be approaching a critical reversion point that can send shares even higher in April 2025.

BNPP LC EURPAB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BNPP LC EURPAB are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, BNPP LC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Gold Bullion and BNPP LC

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

The idea behind Gold Bullion Securities and BNPP LC EURPAB 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.