Correlation Between IShares Equity and BNP Paribas

Can any of the company-specific risk be diversified away by investing in both IShares Equity 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 Equity 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 Equity Enhanced and BNP Paribas Midcap, you can compare the effects of market volatilities on IShares Equity 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 Equity with a short position of BNP Paribas. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Equity and BNP Paribas.

Diversification Opportunities for IShares Equity and BNP Paribas

-0.7

Correlation Coefficient

IShares Equity  BNP Paribas

Excellent diversification

The 3 months correlation between IShares and BNP is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding iShares Equity Enhanced and BNP Paribas Midcap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNP Paribas Midcap and IShares Equity 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 Equity Enhanced 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 Midcap has no effect on the direction of IShares Equity i.e., IShares Equity and BNP Paribas go up and down completely randomly.

Pair Corralation between IShares Equity and BNP Paribas

Assuming the 90 days trading horizon iShares Equity Enhanced is expected to generate 1.16 times more return on investment than BNP Paribas. However, IShares Equity is 1.16 times more volatile than BNP Paribas Midcap. It trades about 0.16 of its potential returns per unit of risk. BNP Paribas Midcap is currently generating about -0.07 per unit of risk. If you would invest  498.00  in iShares Equity Enhanced on October 22, 2024 and sell it today you would earn a total of  45.00  from holding iShares Equity Enhanced or generate 9.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

iShares Equity Enhanced  vs.  BNP Paribas Midcap

iShares Equity Enhanced

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Equity Enhanced are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather weak technical and fundamental indicators, IShares Equity may actually be approaching a critical reversion point that can send shares even higher in February 2025.

BNP Paribas Midcap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BNP Paribas Midcap has generated negative risk-adjusted returns adding no value to fund investors. Despite fairly strong basic indicators, BNP Paribas is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with IShares Equity and BNP Paribas

The main advantage of trading using opposite IShares Equity and BNP Paribas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Equity 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 Equity Enhanced and BNP Paribas Midcap 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.