Correlation Between Alphabet and BNP Paribas

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Can any of the company-specific risk be diversified away by investing in both Alphabet 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 Alphabet and BNP Paribas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alphabet Inc Class C and BNP Paribas Midcap, you can compare the effects of market volatilities on Alphabet 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 Alphabet with a short position of BNP Paribas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and BNP Paribas.

Diversification Opportunities for Alphabet and BNP Paribas

-0.66
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Alphabet and BNP is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and BNP Paribas Midcap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNP Paribas Midcap and Alphabet 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 Alphabet Inc Class C 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 Midcap has no effect on the direction of Alphabet i.e., Alphabet and BNP Paribas go up and down completely randomly.

Pair Corralation between Alphabet and BNP Paribas

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 2.44 times more return on investment than BNP Paribas. However, Alphabet is 2.44 times more volatile than BNP Paribas Midcap. It trades about 0.16 of its potential returns per unit of risk. BNP Paribas Midcap is currently generating about -0.14 per unit of risk. If you would invest  16,289  in Alphabet Inc Class C on September 23, 2024 and sell it today you would earn a total of  3,007  from holding Alphabet Inc Class C or generate 18.46% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Alphabet Inc Class C  vs.  BNP Paribas Midcap

 Performance 
       Timeline  
Alphabet Class C 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.
BNP Paribas Midcap 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days BNP Paribas Midcap has generated negative risk-adjusted returns adding no value to fund investors. Despite latest weak performance, the Fund's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the fund traders.

Alphabet and BNP Paribas Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alphabet and BNP Paribas

The main advantage of trading using opposite Alphabet and BNP Paribas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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 Alphabet Inc Class C and BNP Paribas Midcap 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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