Correlation Between LSI Software and BNP Paribas

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

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

Diversification Opportunities for LSI Software and BNP Paribas

-0.67

Correlation Coefficient

LSI Software  BNP Paribas

Excellent diversification

The 3 months correlation between LSI and BNP is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding LSI Software SA and BNP Paribas Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNP Paribas Bank and LSI Software 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 LSI Software SA 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 Bank has no effect on the direction of LSI Software i.e., LSI Software and BNP Paribas go up and down completely randomly.

Pair Corralation between LSI Software and BNP Paribas

Assuming the 90 days trading horizon LSI Software is expected to generate 18.38 times less return on investment than BNP Paribas. In addition to that, LSI Software is 1.77 times more volatile than BNP Paribas Bank. It trades about 0.01 of its total potential returns per unit of risk. BNP Paribas Bank is currently generating about 0.36 per unit of volatility. If you would invest  8,260  in BNP Paribas Bank on October 12, 2024 and sell it today you would earn a total of  720.00  from holding BNP Paribas Bank or generate 8.72% return on investment over 90 days.

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

LSI Software SA  vs.  BNP Paribas Bank

LSI Software SA

Risk-Adjusted Performance

5 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LSI Software SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, LSI Software may actually be approaching a critical reversion point that can send shares even higher in February 2025.

BNP Paribas Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BNP Paribas Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, BNP Paribas is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with LSI Software and BNP Paribas

The main advantage of trading using opposite LSI Software and BNP Paribas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LSI Software 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 LSI Software SA and BNP Paribas Bank 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.