Correlation Between BNP Paribas and LOreal SA
Can any of the company-specific risk be diversified away by investing in both BNP Paribas and LOreal SA 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 BNP Paribas and LOreal SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BNP Paribas SA and LOreal SA, you can compare the effects of market volatilities on BNP Paribas and LOreal SA 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 BNP Paribas with a short position of LOreal SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of BNP Paribas and LOreal SA.
Diversification Opportunities for BNP Paribas and LOreal SA
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BNP and LOreal is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding BNP Paribas SA and LOreal SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOreal SA and BNP Paribas 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 BNP Paribas SA are associated (or correlated) with LOreal SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOreal SA has no effect on the direction of BNP Paribas i.e., BNP Paribas and LOreal SA go up and down completely randomly.
Pair Corralation between BNP Paribas and LOreal SA
Assuming the 90 days trading horizon BNP Paribas SA is expected to generate 0.97 times more return on investment than LOreal SA. However, BNP Paribas SA is 1.03 times less risky than LOreal SA. It trades about -0.1 of its potential returns per unit of risk. LOreal SA is currently generating about -0.2 per unit of risk. If you would invest 6,324 in BNP Paribas SA on September 26, 2024 and sell it today you would lose (570.00) from holding BNP Paribas SA or give up 9.01% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 98.46% |
Values | Daily Returns |
BNP Paribas SA vs. LOreal SA
Performance |
Timeline |
BNP Paribas SA |
LOreal SA |
BNP Paribas and LOreal SA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BNP Paribas and LOreal SA
The main advantage of trading using opposite BNP Paribas and LOreal SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BNP Paribas position performs unexpectedly, LOreal SA 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 LOreal SA will offset losses from the drop in LOreal SA's long position.BNP Paribas vs. Societe Generale SA | BNP Paribas vs. Credit Agricole SA | BNP Paribas vs. AXA SA | BNP Paribas vs. Sanofi SA |
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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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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