Correlation Between CaixaBank and BNP PARIBAS

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

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

Diversification Opportunities for CaixaBank and BNP PARIBAS

0.22

Correlation Coefficient

CaixaBank  BNP PARIBAS

Modest diversification

The 3 months correlation between CaixaBank and BNP is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding CaixaBank SA and BNP PARIBAS ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNP PARIBAS ADR and CaixaBank 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 CaixaBank 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 ADR has no effect on the direction of CaixaBank i.e., CaixaBank and BNP PARIBAS go up and down completely randomly.

Pair Corralation between CaixaBank and BNP PARIBAS

Assuming the 90 days trading horizon CaixaBank SA is expected to generate 1.21 times more return on investment than BNP PARIBAS. However, CaixaBank is 1.21 times more volatile than BNP PARIBAS ADR. It trades about -0.04 of its potential returns per unit of risk. BNP PARIBAS ADR is currently generating about -0.11 per unit of risk. If you would invest  535.00  in CaixaBank SA on September 23, 2024 and sell it today you would lose (31.00) from holding CaixaBank SA or give up 5.79% of portfolio value over 90 days.

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

CaixaBank SA  vs.  BNP PARIBAS ADR

CaixaBank SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CaixaBank SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, CaixaBank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

BNP PARIBAS ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BNP PARIBAS ADR 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 CaixaBank and BNP PARIBAS

The main advantage of trading using opposite CaixaBank and BNP PARIBAS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CaixaBank 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's long position.

The idea behind CaixaBank SA and BNP PARIBAS ADR 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.