Correlation Between Capital Income and BNP Paribas
Can any of the company-specific risk be diversified away by investing in both Capital Income and BNP Paribas 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 Capital Income and BNP Paribas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital Income Builder and BNP Paribas Easy, you can compare the effects of market volatilities on Capital Income and BNP Paribas 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 Capital Income with a short position of BNP Paribas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Income and BNP Paribas.
Diversification Opportunities for Capital Income and BNP Paribas
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Capital and BNP is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Capital Income Builder and BNP Paribas Easy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNP Paribas Easy and Capital Income 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 Capital Income Builder are associated (or correlated) with BNP Paribas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BNP Paribas Easy has no effect on the direction of Capital Income i.e., Capital Income and BNP Paribas go up and down completely randomly.
Pair Corralation between Capital Income and BNP Paribas
Assuming the 90 days horizon Capital Income is expected to generate 1.17 times less return on investment than BNP Paribas. But when comparing it to its historical volatility, Capital Income Builder is 1.2 times less risky than BNP Paribas. It trades about 0.24 of its potential returns per unit of risk. BNP Paribas Easy is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 24,900 in BNP Paribas Easy on October 24, 2024 and sell it today you would earn a total of 800.00 from holding BNP Paribas Easy or generate 3.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.0% |
| Values | Daily Returns |
Capital Income Builder vs. BNP Paribas Easy
Performance |
| Timeline |
| Capital Income Builder |
| BNP Paribas Easy |
Capital Income and BNP Paribas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Income and BNP Paribas
The main advantage of trading using opposite Capital Income and BNP Paribas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Income position performs unexpectedly, BNP Paribas 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 BNP Paribas will offset losses from the drop in BNP Paribas' long position.| Capital Income vs. Old Westbury Municipal | Capital Income vs. Lord Abbett Intermediate | Capital Income vs. Blackrock Pa Muni | Capital Income vs. Inverse Government Long |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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