Correlation Between Commerzbank and Credit Agricole

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

Diversification Opportunities for Commerzbank and Credit Agricole

0.17

Correlation Coefficient

Commerzbank  Credit Agricole

Average diversification

The 3 months correlation between Commerzbank and Credit is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Commerzbank AG PK and Credit Agricole SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credit 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 Credit Agricole. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credit Agricole SA has no effect on the direction of Commerzbank i.e., Commerzbank and Credit Agricole go up and down completely randomly.

Pair Corralation between Commerzbank and Credit Agricole

Assuming the 90 days horizon Commerzbank AG PK is expected to generate 2.07 times more return on investment than Credit Agricole. However, Commerzbank is 2.07 times more volatile than Credit Agricole SA. It trades about 0.05 of its potential returns per unit of risk. Credit Agricole SA is currently generating about -0.15 per unit of risk. If you would invest  1,446  in Commerzbank AG PK on September 2, 2024 and sell it today you would earn a total of  92.00  from holding Commerzbank AG PK or generate 6.36% return on investment over 90 days.

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

Commerzbank AG PK  vs.  Credit Agricole SA

Commerzbank AG PK

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Commerzbank AG PK are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Commerzbank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Commerzbank and Credit Agricole

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

The idea behind Commerzbank AG PK and Credit 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.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.