Correlation Between GM and BNP Paribas

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

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

Diversification Opportunities for GM and BNP Paribas

-0.81

Correlation Coefficient

GM  BNP Paribas

Pay attention - limited upside

The 3 months correlation between GM and BNP is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding General Motors 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 GM 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 General Motors 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 GM i.e., GM and BNP Paribas go up and down completely randomly.

Pair Corralation between GM and BNP Paribas

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the BNP Paribas. In addition to that, GM is 5.72 times more volatile than BNP Paribas Easy. It trades about -0.13 of its total potential returns per unit of risk. BNP Paribas Easy is currently generating about 0.28 per unit of volatility. If you would invest  2,806  in BNP Paribas Easy on September 16, 2024 and sell it today you would earn a total of  78.00  from holding BNP Paribas Easy or generate 2.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

General Motors  vs.  BNP Paribas Easy

General Motors

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

BNP Paribas Easy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BNP Paribas Easy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, BNP Paribas is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with GM and BNP Paribas

The main advantage of trading using opposite GM and BNP Paribas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.