Correlation Between Microsoft and BNP Paribas
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and BNP Paribas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and BNP Paribas SA, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of BNP Paribas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and BNP Paribas.
Diversification Opportunities for Microsoft and BNP Paribas
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and BNP is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft 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 Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and BNP Paribas go up and down completely randomly.
Pair Corralation between Microsoft and BNP Paribas
Given the investment horizon of 90 days Microsoft is expected to generate 0.91 times more return on investment than BNP Paribas. However, Microsoft is 1.1 times less risky than BNP Paribas. It trades about -0.04 of its potential returns per unit of risk. BNP Paribas SA is currently generating about -0.43 per unit of risk. If you would invest 43,167 in Microsoft on August 31, 2024 and sell it today you would lose (868.00) from holding Microsoft or give up 2.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. BNP Paribas SA
Performance |
| Timeline |
| Microsoft |
| BNP Paribas SA |
Microsoft and BNP Paribas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and BNP Paribas
The main advantage of trading using opposite Microsoft and BNP Paribas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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