Correlation Between BNP Paribas and UniCredit SpA
Can any of the company-specific risk be diversified away by investing in both BNP Paribas and UniCredit SpA 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 BNP Paribas and UniCredit SpA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BNP Paribas SA and UniCredit SpA, you can compare the effects of market volatilities on BNP Paribas and UniCredit SpA 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 BNP Paribas with a short position of UniCredit SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of BNP Paribas and UniCredit SpA.
Diversification Opportunities for BNP Paribas and UniCredit SpA
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BNP and UniCredit is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding BNP Paribas SA and UniCredit SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UniCredit SpA and BNP Paribas 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 BNP Paribas SA are associated (or correlated) with UniCredit SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UniCredit SpA has no effect on the direction of BNP Paribas i.e., BNP Paribas and UniCredit SpA go up and down completely randomly.
Pair Corralation between BNP Paribas and UniCredit SpA
Assuming the 90 days horizon BNP Paribas is expected to generate 6.65 times less return on investment than UniCredit SpA. But when comparing it to its historical volatility, BNP Paribas SA is 1.22 times less risky than UniCredit SpA. It trades about 0.02 of its potential returns per unit of risk. UniCredit SpA is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,325 in UniCredit SpA on October 15, 2024 and sell it today you would earn a total of 2,664 from holding UniCredit SpA or generate 201.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BNP Paribas SA vs. UniCredit SpA
Performance |
| Timeline |
| BNP Paribas SA |
| UniCredit SpA |
BNP Paribas and UniCredit SpA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BNP Paribas and UniCredit SpA
The main advantage of trading using opposite BNP Paribas and UniCredit SpA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BNP Paribas position performs unexpectedly, UniCredit SpA 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 UniCredit SpA will offset losses from the drop in UniCredit SpA's long position.| BNP Paribas vs. UNIQA INSURANCE GR | BNP Paribas vs. VULCAN MATERIALS | BNP Paribas vs. Japan Post Insurance | BNP Paribas vs. Universal Insurance Holdings |
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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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