Correlation Between Ford and BNP Paribas

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

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

Diversification Opportunities for Ford and BNP Paribas

-0.02

Correlation Coefficient

Ford  BNP Paribas

Good diversification

The 3 months correlation between Ford and BNP is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor 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 Ford 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 Ford Motor 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 Ford i.e., Ford and BNP Paribas go up and down completely randomly.

Pair Corralation between Ford and BNP Paribas

Taking into account the 90-day investment horizon Ford is expected to generate 1.2 times less return on investment than BNP Paribas. In addition to that, Ford is 1.55 times more volatile than BNP Paribas SA. It trades about 0.01 of its total potential returns per unit of risk. BNP Paribas SA is currently generating about 0.03 per unit of volatility. If you would invest  5,293  in BNP Paribas SA on September 23, 2024 and sell it today you would earn a total of  454.00  from holding BNP Paribas SA or generate 8.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.54%
Values	Daily Returns

Ford Motor  vs.  BNP Paribas SA

Ford Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Ford and BNP Paribas

The main advantage of trading using opposite Ford and BNP Paribas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.