Correlation Between Air France and BNP Paribas
Can any of the company-specific risk be diversified away by investing in both Air France 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 Air France and BNP Paribas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air France KLM SA and BNP Paribas SA, you can compare the effects of market volatilities on Air France 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 Air France with a short position of BNP Paribas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air France and BNP Paribas.
Diversification Opportunities for Air France and BNP Paribas
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Air and BNP is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Air France KLM 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 Air France 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 Air France KLM 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 Air France i.e., Air France and BNP Paribas go up and down completely randomly.
Pair Corralation between Air France and BNP Paribas
Assuming the 90 days horizon Air France KLM SA is expected to under-perform the BNP Paribas. In addition to that, Air France is 1.78 times more volatile than BNP Paribas SA. It trades about -0.33 of its total potential returns per unit of risk. BNP Paribas SA is currently generating about -0.44 per unit of volatility. If you would invest 6,594 in BNP Paribas SA on August 30, 2024 and sell it today you would lose (980.00) from holding BNP Paribas SA or give up 14.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air France KLM SA vs. BNP Paribas SA
Performance |
| Timeline |
| Air France KLM |
| BNP Paribas SA |
Air France and BNP Paribas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air France and BNP Paribas
The main advantage of trading using opposite Air France and BNP Paribas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air France 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.| Air France vs. Reworld Media | Air France vs. Groupe Pizzorno Environnement | Air France vs. Fill Up Media | Air France vs. Metalliance SA |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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