Correlation Between BNP Paribas and HDFC Bank
Can any of the company-specific risk be diversified away by investing in both BNP Paribas and HDFC Bank 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 BNP Paribas and HDFC Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BNP Paribas SA and HDFC Bank Limited, you can compare the effects of market volatilities on BNP Paribas and HDFC Bank 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 BNP Paribas with a short position of HDFC Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of BNP Paribas and HDFC Bank.
Diversification Opportunities for BNP Paribas and HDFC Bank
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BNP and HDFC is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding BNP Paribas SA and HDFC Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HDFC Bank Limited and BNP Paribas 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 BNP Paribas SA are associated (or correlated) with HDFC Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HDFC Bank Limited has no effect on the direction of BNP Paribas i.e., BNP Paribas and HDFC Bank go up and down completely randomly.
Pair Corralation between BNP Paribas and HDFC Bank
Assuming the 90 days horizon BNP Paribas SA is expected to generate 1.58 times more return on investment than HDFC Bank. However, BNP Paribas is 1.58 times more volatile than HDFC Bank Limited. It trades about 0.04 of its potential returns per unit of risk. HDFC Bank Limited is currently generating about -0.03 per unit of risk. If you would invest 5,753 in BNP Paribas SA on December 30, 2023 and sell it today you would earn a total of 1,247 from holding BNP Paribas SA or generate 21.68% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
BNP Paribas SA vs. HDFC Bank Limited
Performance |
Timeline |
BNP Paribas SA |
HDFC Bank Limited |
BNP Paribas and HDFC Bank Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BNP Paribas and HDFC Bank
The main advantage of trading using opposite BNP Paribas and HDFC Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BNP Paribas position performs unexpectedly, HDFC Bank 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 HDFC Bank will offset losses from the drop in HDFC Bank's long position.BNP Paribas vs. China Merchants Bank | BNP Paribas vs. HDFC Bank Limited | BNP Paribas vs. Fifth Third Bancorp | BNP Paribas vs. Banco Bradesco SA |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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