Correlation Between Credit Agricole and BNP Paribas

Can any of the company-specific risk be diversified away by investing in both Credit 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 Credit 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 Credit Agricole SA and BNP Paribas SA, you can compare the effects of market volatilities on Credit 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 Credit Agricole with a short position of BNP Paribas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Credit Agricole and BNP Paribas.

Diversification Opportunities for Credit Agricole and BNP Paribas

0.86

Correlation Coefficient

Credit Agricole  BNP Paribas

Very poor diversification

The 3 months correlation between Credit and BNP is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Credit 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 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 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 Credit Agricole i.e., Credit Agricole and BNP Paribas go up and down completely randomly.

Pair Corralation between Credit Agricole and BNP Paribas

Assuming the 90 days horizon Credit Agricole SA is expected to under-perform the BNP Paribas. But the pink sheet apears to be less risky and, when comparing its historical volatility, Credit Agricole SA is 1.41 times less risky than BNP Paribas. The pink sheet trades about -0.44 of its potential returns per unit of risk. The BNP Paribas SA is currently generating about -0.23 of returns per unit of risk over similar time horizon. If you would invest  6,816  in BNP Paribas SA on September 4, 2024 and sell it today you would lose (780.00) from holding BNP Paribas SA or give up 11.44% of portfolio value over 90 days.

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

Credit Agricole SA  vs.  BNP Paribas SA

Credit Agricole SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Credit Agricole SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 Credit Agricole and BNP Paribas

The main advantage of trading using opposite Credit Agricole and BNP Paribas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Credit 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 Credit 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.