Correlation Between BNP Paribas and AIB Group

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Can any of the company-specific risk be diversified away by investing in both BNP Paribas and AIB Group 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 AIB Group 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 AIB Group plc, you can compare the effects of market volatilities on BNP Paribas and AIB Group 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 AIB Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of BNP Paribas and AIB Group.

Diversification Opportunities for BNP Paribas and AIB Group

-0.3
  Correlation Coefficient

Very good diversification

The 3 months correlation between BNP and AIB is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding BNP Paribas SA and AIB Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIB Group plc 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 AIB Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIB Group plc has no effect on the direction of BNP Paribas i.e., BNP Paribas and AIB Group go up and down completely randomly.

Pair Corralation between BNP Paribas and AIB Group

Assuming the 90 days trading horizon BNP Paribas SA is expected to under-perform the AIB Group. But the stock apears to be less risky and, when comparing its historical volatility, BNP Paribas SA is 1.35 times less risky than AIB Group. The stock trades about -0.08 of its potential returns per unit of risk. The AIB Group plc is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  518.00  in AIB Group plc on September 1, 2024 and sell it today you would lose (17.00) from holding AIB Group plc or give up 3.28% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

BNP Paribas SA  vs.  AIB Group plc

 Performance 
       Timeline  
BNP Paribas SA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
AIB Group plc 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days AIB Group plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, AIB Group is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

BNP Paribas and AIB Group Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BNP Paribas and AIB Group

The main advantage of trading using opposite BNP Paribas and AIB Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BNP Paribas position performs unexpectedly, AIB Group 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 AIB Group will offset losses from the drop in AIB Group's long position.
The idea behind BNP Paribas SA and AIB Group plc 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.

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