Correlation Between BNP Paribas and Orange SA
Can any of the company-specific risk be diversified away by investing in both BNP Paribas and Orange SA 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 Orange SA 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 Orange SA, you can compare the effects of market volatilities on BNP Paribas and Orange SA 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 Orange SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of BNP Paribas and Orange SA.
Diversification Opportunities for BNP Paribas and Orange SA
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BNP and Orange is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding BNP Paribas SA and Orange SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orange SA 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 Orange SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orange SA has no effect on the direction of BNP Paribas i.e., BNP Paribas and Orange SA go up and down completely randomly.
Pair Corralation between BNP Paribas and Orange SA
Assuming the 90 days trading horizon BNP Paribas SA is expected to generate 1.57 times more return on investment than Orange SA. However, BNP Paribas is 1.57 times more volatile than Orange SA. It trades about 0.02 of its potential returns per unit of risk. Orange SA is currently generating about 0.01 per unit of risk. If you would invest 5,341 in BNP Paribas SA on August 31, 2024 and sell it today you would earn a total of 323.00 from holding BNP Paribas SA or generate 6.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BNP Paribas SA vs. Orange SA
Performance |
| Timeline |
| BNP Paribas SA |
| Orange SA |
BNP Paribas and Orange SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BNP Paribas and Orange SA
The main advantage of trading using opposite BNP Paribas and Orange SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BNP Paribas position performs unexpectedly, Orange SA 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 Orange SA will offset losses from the drop in Orange SA's long position.| BNP Paribas vs. Societe Generale SA | BNP Paribas vs. Credit Agricole SA | BNP Paribas vs. AXA SA | BNP Paribas vs. Sanofi 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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