Correlation Between BNP Paribas and Farmers

Can any of the company-specific risk be diversified away by investing in both BNP Paribas and Farmers 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 Farmers 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 Farmers And Merchants, you can compare the effects of market volatilities on BNP Paribas and Farmers 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 Farmers. Check out your portfolio center. Please also check ongoing floating volatility patterns of BNP Paribas and Farmers.

Diversification Opportunities for BNP Paribas and Farmers

-0.66

Correlation Coefficient

BNP Paribas  Farmers

Excellent diversification

The 3 months correlation between BNP and Farmers is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding BNP Paribas SA and Farmers And Merchants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmers And Merchants 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 Farmers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmers And Merchants has no effect on the direction of BNP Paribas i.e., BNP Paribas and Farmers go up and down completely randomly.

Pair Corralation between BNP Paribas and Farmers

Assuming the 90 days horizon BNP Paribas SA is expected to under-perform the Farmers. In addition to that, BNP Paribas is 1.97 times more volatile than Farmers And Merchants. It trades about -0.38 of its total potential returns per unit of risk. Farmers And Merchants is currently generating about 0.32 per unit of volatility. If you would invest  545,906  in Farmers And Merchants on September 4, 2024 and sell it today you would earn a total of  31,994  from holding Farmers And Merchants or generate 5.86% return on investment over 90 days.

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

BNP Paribas SA  vs.  Farmers And Merchants

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. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Farmers And Merchants

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Farmers And Merchants are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental drivers, Farmers disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BNP Paribas and Farmers

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

The idea behind BNP Paribas SA and Farmers And Merchants 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.