Correlation Between BNP Paribas and Erste Group
Can any of the company-specific risk be diversified away by investing in both BNP Paribas and Erste 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 Erste 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 Erste Group Bank, you can compare the effects of market volatilities on BNP Paribas and Erste 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 Erste Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of BNP Paribas and Erste Group.
Diversification Opportunities for BNP Paribas and Erste Group
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BNP and Erste is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding BNP Paribas SA and Erste Group Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erste Group 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 Erste Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erste Group Bank has no effect on the direction of BNP Paribas i.e., BNP Paribas and Erste Group go up and down completely randomly.
Pair Corralation between BNP Paribas and Erste Group
Assuming the 90 days horizon BNP Paribas is expected to generate 8.26 times less return on investment than Erste Group. But when comparing it to its historical volatility, BNP Paribas SA is 1.55 times less risky than Erste Group. It trades about 0.01 of its potential returns per unit of risk. Erste Group Bank is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 3,400 in Erste Group Bank on August 31, 2024 and sell it today you would earn a total of 2,025 from holding Erste Group Bank or generate 59.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 91.18% |
| Values | Daily Returns |
BNP Paribas SA vs. Erste Group Bank
Performance |
| Timeline |
| BNP Paribas SA |
| Erste Group Bank |
BNP Paribas and Erste Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BNP Paribas and Erste Group
The main advantage of trading using opposite BNP Paribas and Erste Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BNP Paribas position performs unexpectedly, Erste 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 Erste Group will offset losses from the drop in Erste Group's long position.| BNP Paribas vs. HUMANA INC | BNP Paribas vs. SCOR PK | BNP Paribas vs. Aquagold International | BNP Paribas vs. Thrivent High Yield |
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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