Correlation Between Crdit Agricole and BNP Paribas

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

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

Diversification Opportunities for Crdit Agricole and BNP Paribas

0.93

Correlation Coefficient

Crdit Agricole  BNP Paribas

Almost no diversification

The 3 months correlation between Crdit and BNP is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Crdit Agricole SA and BNP Paribas SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNP Paribas SA and Crdit Agricole 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 Crdit Agricole 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 SA has no effect on the direction of Crdit Agricole i.e., Crdit Agricole and BNP Paribas go up and down completely randomly.

Pair Corralation between Crdit Agricole and BNP Paribas

Assuming the 90 days horizon Crdit Agricole SA is expected to generate 1.27 times more return on investment than BNP Paribas. However, Crdit Agricole is 1.27 times more volatile than BNP Paribas SA. It trades about -0.01 of its potential returns per unit of risk. BNP Paribas SA is currently generating about -0.07 per unit of risk. If you would invest  1,329  in Crdit Agricole SA on September 17, 2024 and sell it today you would lose (7.00) from holding Crdit Agricole SA or give up 0.53% of portfolio value over 90 days.

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

Crdit Agricole SA  vs.  BNP Paribas SA

Crdit Agricole SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crdit Agricole SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

BNP Paribas SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BNP Paribas SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Crdit Agricole and BNP Paribas

The main advantage of trading using opposite Crdit Agricole and BNP Paribas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crdit Agricole 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 Crdit Agricole SA and BNP Paribas SA 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.