Correlation Between CREDIT AGRICOLE and Bank of America

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

By analyzing existing cross correlation between CREDIT AGRICOLE and Verizon Communications, you can compare the effects of market volatilities on CREDIT AGRICOLE and Bank of America 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 CREDIT AGRICOLE with a short position of Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of CREDIT AGRICOLE and Bank of America.

Diversification Opportunities for CREDIT AGRICOLE and Bank of America

0.76

Correlation Coefficient

CREDIT AGRICOLE  Bank of America

Poor diversification

The 3 months correlation between CREDIT and Bank is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding CREDIT AGRICOLE and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and CREDIT 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 CREDIT AGRICOLE are associated (or correlated) with Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of CREDIT AGRICOLE i.e., CREDIT AGRICOLE and Bank of America go up and down completely randomly.

Pair Corralation between CREDIT AGRICOLE and Bank of America

Assuming the 90 days trading horizon CREDIT AGRICOLE is expected to generate 0.57 times more return on investment than Bank of America. However, CREDIT AGRICOLE is 1.76 times less risky than Bank of America. It trades about 0.42 of its potential returns per unit of risk. Verizon Communications is currently generating about 0.07 per unit of risk. If you would invest  1,300  in CREDIT AGRICOLE on December 21, 2024 and sell it today you would earn a total of  387.00  from holding CREDIT AGRICOLE or generate 29.77% return on investment over 90 days.

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

CREDIT AGRICOLE  vs.  Verizon Communications

CREDIT AGRICOLE

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in CREDIT AGRICOLE are ranked lower than 33 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, CREDIT AGRICOLE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Verizon Communications

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, Bank of America may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with CREDIT AGRICOLE and Bank of America

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

The idea behind CREDIT AGRICOLE and Verizon Communications 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.