Correlation Between BNPP BONDSRI and BNPP LC

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

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

Diversification Opportunities for BNPP BONDSRI and BNPP LC

0.39

Correlation Coefficient

BNPP BONDSRI  BNPP LC

Weak diversification

The 3 months correlation between BNPP and BNPP is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding BNPP BONDSRI ETF and BNPP LC EURPAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNPP LC EURPAB and BNPP BONDSRI 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 BONDSRI ETF are associated (or correlated) with BNPP LC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BNPP LC EURPAB has no effect on the direction of BNPP BONDSRI i.e., BNPP BONDSRI and BNPP LC go up and down completely randomly.

Pair Corralation between BNPP BONDSRI and BNPP LC

Assuming the 90 days trading horizon BNPP BONDSRI ETF is expected to under-perform the BNPP LC. But the etf apears to be less risky and, when comparing its historical volatility, BNPP BONDSRI ETF is 3.88 times less risky than BNPP LC. The etf trades about -0.03 of its potential returns per unit of risk. The BNPP LC EURPAB is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,190  in BNPP LC EURPAB on December 22, 2024 and sell it today you would earn a total of  105.00  from holding BNPP LC EURPAB or generate 8.82% return on investment over 90 days.

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

BNPP BONDSRI ETF  vs.  BNPP LC EURPAB

BNPP BONDSRI ETF

Risk-Adjusted Performance

Very Weak

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

BNPP LC EURPAB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BNPP LC EURPAB are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, BNPP LC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with BNPP BONDSRI and BNPP LC

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

The idea behind BNPP BONDSRI ETF and BNPP LC EURPAB 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.