Correlation Between Deutsche Bank and BNP Paribas

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

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

Diversification Opportunities for Deutsche Bank and BNP Paribas

0.16

Correlation Coefficient

Deutsche Bank  BNP Paribas

Average diversification

The 3 months correlation between Deutsche and BNP is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Bank AG 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 Deutsche Bank 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 Deutsche Bank AG 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 Deutsche Bank i.e., Deutsche Bank and BNP Paribas go up and down completely randomly.

Pair Corralation between Deutsche Bank and BNP Paribas

Allowing for the 90-day total investment horizon Deutsche Bank AG is expected to generate 0.95 times more return on investment than BNP Paribas. However, Deutsche Bank AG is 1.05 times less risky than BNP Paribas. It trades about 0.07 of its potential returns per unit of risk. BNP Paribas SA is currently generating about -0.34 per unit of risk. If you would invest  1,712  in Deutsche Bank AG on September 5, 2024 and sell it today you would earn a total of  47.00  from holding Deutsche Bank AG or generate 2.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Deutsche Bank AG  vs.  BNP Paribas SA

Deutsche Bank AG

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Bank AG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental drivers, Deutsche Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 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 Deutsche Bank and BNP Paribas

The main advantage of trading using opposite Deutsche Bank and BNP Paribas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deutsche Bank 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 Deutsche Bank AG 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.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.