Correlation Between Commerzbank and BNP Paribas
Can any of the company-specific risk be diversified away by investing in both Commerzbank 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 Commerzbank and BNP Paribas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commerzbank AG and BNP Paribas SA, you can compare the effects of market volatilities on Commerzbank 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 Commerzbank with a short position of BNP Paribas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commerzbank and BNP Paribas.
Diversification Opportunities for Commerzbank and BNP Paribas
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Commerzbank and BNP is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Commerzbank AG 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 Commerzbank 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 Commerzbank AG 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 Commerzbank i.e., Commerzbank and BNP Paribas go up and down completely randomly.
Pair Corralation between Commerzbank and BNP Paribas
Assuming the 90 days trading horizon Commerzbank AG is expected to generate 1.71 times more return on investment than BNP Paribas. However, Commerzbank is 1.71 times more volatile than BNP Paribas SA. It trades about 0.06 of its potential returns per unit of risk. BNP Paribas SA is currently generating about 0.03 per unit of risk. If you would invest 727.00 in Commerzbank AG on September 3, 2024 and sell it today you would earn a total of 703.00 from holding Commerzbank AG or generate 96.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commerzbank AG vs. BNP Paribas SA
Performance |
| Timeline |
| Commerzbank AG |
| BNP Paribas SA |
Commerzbank and BNP Paribas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commerzbank and BNP Paribas
The main advantage of trading using opposite Commerzbank and BNP Paribas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commerzbank 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.| Commerzbank vs. Chunghwa Telecom Co | Commerzbank vs. Dairy Farm International | Commerzbank vs. United Natural Foods | Commerzbank vs. Spirent Communications plc |
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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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