Correlation Between Itau Unibanco and BNP Paribas
Can any of the company-specific risk be diversified away by investing in both Itau Unibanco 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 Itau Unibanco and BNP Paribas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Itau Unibanco Banco and BNP Paribas SA, you can compare the effects of market volatilities on Itau Unibanco 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 Itau Unibanco with a short position of BNP Paribas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Itau Unibanco and BNP Paribas.
Diversification Opportunities for Itau Unibanco and BNP Paribas
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Itau and BNP is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Itau Unibanco Banco and BNP Paribas SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNP Paribas SA and Itau Unibanco 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 Itau Unibanco Banco 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 SA has no effect on the direction of Itau Unibanco i.e., Itau Unibanco and BNP Paribas go up and down completely randomly.
Pair Corralation between Itau Unibanco and BNP Paribas
Given the investment horizon of 90 days Itau Unibanco Banco is expected to under-perform the BNP Paribas. But the stock apears to be less risky and, when comparing its historical volatility, Itau Unibanco Banco is 1.06 times less risky than BNP Paribas. The stock trades about -0.16 of its potential returns per unit of risk. The BNP Paribas SA is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 5,800 in BNP Paribas SA on October 1, 2024 and sell it today you would earn a total of 303.00 from holding BNP Paribas SA or generate 5.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Itau Unibanco Banco vs. BNP Paribas SA
Performance |
| Timeline |
| Itau Unibanco Banco |
| BNP Paribas SA |
Itau Unibanco and BNP Paribas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Itau Unibanco and BNP Paribas
The main advantage of trading using opposite Itau Unibanco and BNP Paribas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Itau Unibanco 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.The idea behind Itau Unibanco Banco and BNP Paribas SA 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.| BNP Paribas vs. Lloyds Banking Group | BNP Paribas vs. Bank of Hawaii | BNP Paribas vs. Deutsche Bank AG | BNP Paribas vs. PNC Financial Services |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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