Correlation Between Nordea Bank and BNP Paribas

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Can any of the company-specific risk be diversified away by investing in both Nordea Bank 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 Nordea Bank and BNP Paribas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nordea Bank Abp and BNP Paribas SA, you can compare the effects of market volatilities on Nordea Bank 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 Nordea Bank with a short position of BNP Paribas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordea Bank and BNP Paribas.

Diversification Opportunities for Nordea Bank and BNP Paribas

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between Nordea and BNP is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Nordea Bank Abp 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 Nordea Bank 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 Nordea Bank Abp 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 Nordea Bank i.e., Nordea Bank and BNP Paribas go up and down completely randomly.

Pair Corralation between Nordea Bank and BNP Paribas

Assuming the 90 days horizon Nordea Bank Abp is expected to generate 0.71 times more return on investment than BNP Paribas. However, Nordea Bank Abp is 1.42 times less risky than BNP Paribas. It trades about -0.23 of its potential returns per unit of risk. BNP Paribas SA is currently generating about -0.51 per unit of risk. If you would invest  1,192  in Nordea Bank Abp on August 28, 2024 and sell it today you would lose (71.00) from holding Nordea Bank Abp or give up 5.96% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.45%
ValuesDaily Returns

Nordea Bank Abp  vs.  BNP Paribas SA

 Performance 
       Timeline  
Nordea Bank Abp 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Nordea Bank Abp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, Nordea Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
BNP Paribas SA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days BNP Paribas SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Nordea Bank and BNP Paribas Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nordea Bank and BNP Paribas

The main advantage of trading using opposite Nordea Bank and BNP Paribas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nordea Bank 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 Nordea Bank Abp 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.
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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