Correlation Between SPDR SP and BNP Paribas

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

By analyzing existing cross correlation between SPDR SP 500 and BNP Paribas Easy, you can compare the effects of market volatilities on SPDR SP 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 SPDR SP with a short position of BNP Paribas. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and BNP Paribas.

Diversification Opportunities for SPDR SP and BNP Paribas

-0.86

Correlation Coefficient

SPDR SP  BNP Paribas

Pay attention - limited upside

The 3 months correlation between SPDR and BNP is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 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 SPDR SP 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 SPDR SP 500 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 SPDR SP i.e., SPDR SP and BNP Paribas go up and down completely randomly.

Pair Corralation between SPDR SP and BNP Paribas

Assuming the 90 days trading horizon SPDR SP 500 is expected to generate 0.68 times more return on investment than BNP Paribas. However, SPDR SP 500 is 1.46 times less risky than BNP Paribas. It trades about 0.27 of its potential returns per unit of risk. BNP Paribas Easy is currently generating about -0.17 per unit of risk. If you would invest  50,415  in SPDR SP 500 on September 16, 2024 and sell it today you would earn a total of  7,265  from holding SPDR SP 500 or generate 14.41% return on investment over 90 days.

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

SPDR SP 500  vs.  BNP Paribas Easy

SPDR SP 500

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 500 are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SPDR SP sustained 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. Even with latest weak performance, the Etf's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Pair Trading with SPDR SP and BNP Paribas

The main advantage of trading using opposite SPDR SP and BNP Paribas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP 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 SPDR SP 500 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.