Correlation Between IShares Core and BNP Paribas

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

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

Diversification Opportunities for IShares Core and BNP Paribas

-0.53

Correlation Coefficient

IShares Core  BNP Paribas

Excellent diversification

The 3 months correlation between IShares and BNP is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP 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 IShares Core 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 iShares Core SP 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 IShares Core i.e., IShares Core and BNP Paribas go up and down completely randomly.

Pair Corralation between IShares Core and BNP Paribas

Assuming the 90 days trading horizon iShares Core SP is expected to generate 1.23 times more return on investment than BNP Paribas. However, IShares Core is 1.23 times more volatile than BNP Paribas Easy. It trades about 0.24 of its potential returns per unit of risk. BNP Paribas Easy is currently generating about -0.01 per unit of risk. If you would invest  53,566  in iShares Core SP on September 16, 2024 and sell it today you would earn a total of  7,572  from holding iShares Core SP or generate 14.14% return on investment over 90 days.

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

iShares Core SP  vs.  BNP Paribas Easy

iShares Core SP

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, IShares Core reported 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. In spite of rather sound forward indicators, BNP Paribas is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares Core and BNP Paribas

The main advantage of trading using opposite IShares Core and BNP Paribas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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 iShares Core SP 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.