Correlation Between Commerzbank and Crdit Agricole

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

By analyzing existing cross correlation between Commerzbank AG PK and Crdit Agricole SA, you can compare the effects of market volatilities on Commerzbank and Crdit Agricole 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 Commerzbank with a short position of Crdit Agricole. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commerzbank and Crdit Agricole.

Diversification Opportunities for Commerzbank and Crdit Agricole

0.48

Correlation Coefficient

Commerzbank  Crdit Agricole

Very weak diversification

The 3 months correlation between Commerzbank and Crdit is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Commerzbank AG PK and Crdit Agricole SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crdit Agricole SA and Commerzbank 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 Commerzbank AG PK are associated (or correlated) with Crdit Agricole. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crdit Agricole SA has no effect on the direction of Commerzbank i.e., Commerzbank and Crdit Agricole go up and down completely randomly.

Pair Corralation between Commerzbank and Crdit Agricole

Assuming the 90 days horizon Commerzbank AG PK is expected to generate 0.97 times more return on investment than Crdit Agricole. However, Commerzbank AG PK is 1.03 times less risky than Crdit Agricole. It trades about -0.02 of its potential returns per unit of risk. Crdit Agricole SA is currently generating about -0.11 per unit of risk. If you would invest  1,656  in Commerzbank AG PK on September 12, 2024 and sell it today you would lose (67.00) from holding Commerzbank AG PK or give up 4.05% of portfolio value over 90 days.

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

Commerzbank AG PK  vs.  Crdit Agricole SA

Commerzbank AG PK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Commerzbank AG PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, Commerzbank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Crdit Agricole SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Commerzbank and Crdit Agricole

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

The idea behind Commerzbank AG PK and Crdit Agricole 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.