Correlation Between BNPP EHY and BNPP BONDSRI

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

By analyzing existing cross correlation between BNPP EHY SRI and BNPP BONDSRI ETF, you can compare the effects of market volatilities on BNPP EHY and BNPP BONDSRI 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 BNPP EHY with a short position of BNPP BONDSRI. Check out your portfolio center. Please also check ongoing floating volatility patterns of BNPP EHY and BNPP BONDSRI.

Diversification Opportunities for BNPP EHY and BNPP BONDSRI

0.89

Correlation Coefficient

BNPP EHY  BNPP BONDSRI

Very poor diversification

The 3 months correlation between BNPP and BNPP is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding BNPP EHY SRI and BNPP BONDSRI ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNPP BONDSRI ETF and BNPP EHY 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 BNPP EHY SRI are associated (or correlated) with BNPP BONDSRI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BNPP BONDSRI ETF has no effect on the direction of BNPP EHY i.e., BNPP EHY and BNPP BONDSRI go up and down completely randomly.

Pair Corralation between BNPP EHY and BNPP BONDSRI

Assuming the 90 days trading horizon BNPP EHY SRI is expected to generate 0.74 times more return on investment than BNPP BONDSRI. However, BNPP EHY SRI is 1.35 times less risky than BNPP BONDSRI. It trades about 0.22 of its potential returns per unit of risk. BNPP BONDSRI ETF is currently generating about 0.09 per unit of risk. If you would invest  923.00  in BNPP EHY SRI on October 4, 2024 and sell it today you would earn a total of  17.00  from holding BNPP EHY SRI or generate 1.84% return on investment over 90 days.

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

BNPP EHY SRI  vs.  BNPP BONDSRI ETF

BNPP EHY SRI

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BNPP EHY SRI are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, BNPP EHY is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

BNPP BONDSRI ETF

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BNPP BONDSRI ETF are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, BNPP BONDSRI is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with BNPP EHY and BNPP BONDSRI

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

The idea behind BNPP EHY SRI and BNPP BONDSRI ETF 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.