Correlation Between BNP Paribas and China Merchants
Can any of the company-specific risk be diversified away by investing in both BNP Paribas and China Merchants 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 China Merchants 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 China Merchants Bank, you can compare the effects of market volatilities on BNP Paribas and China Merchants 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 China Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of BNP Paribas and China Merchants.
Diversification Opportunities for BNP Paribas and China Merchants
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BNP and China is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding BNP Paribas SA and China Merchants Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Merchants Bank 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 China Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Merchants Bank has no effect on the direction of BNP Paribas i.e., BNP Paribas and China Merchants go up and down completely randomly.
Pair Corralation between BNP Paribas and China Merchants
Assuming the 90 days horizon BNP Paribas SA is expected to generate 0.94 times more return on investment than China Merchants. However, BNP Paribas SA is 1.06 times less risky than China Merchants. It trades about 0.33 of its potential returns per unit of risk. China Merchants Bank is currently generating about 0.17 per unit of risk. If you would invest 3,377 in BNP Paribas SA on November 29, 2024 and sell it today you would earn a total of 416.00 from holding BNP Paribas SA or generate 12.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BNP Paribas SA vs. China Merchants Bank
Performance |
| Timeline |
| BNP Paribas SA |
| China Merchants Bank |
BNP Paribas and China Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BNP Paribas and China Merchants
The main advantage of trading using opposite BNP Paribas and China Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BNP Paribas position performs unexpectedly, China Merchants 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 China Merchants will offset losses from the drop in China Merchants' long position.| BNP Paribas vs. Societe Generale ADR | BNP Paribas vs. Intesa Sanpaolo SpA | BNP Paribas vs. Commerzbank AG PK | BNP Paribas vs. Swedbank AB |
| China Merchants vs. China Everbright Bank | China Merchants vs. China Merchants Bank | China Merchants vs. Postal Savings Bank | China Merchants vs. China Citic Bank |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
Other Complementary Tools
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals |