Correlation Between BNP Paribas and Truist Financial

Can any of the company-specific risk be diversified away by investing in both BNP Paribas and Truist Financial 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 Truist Financial 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 Truist Financial Corp, you can compare the effects of market volatilities on BNP Paribas and Truist Financial 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 Truist Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of BNP Paribas and Truist Financial.

Diversification Opportunities for BNP Paribas and Truist Financial

0.69

Correlation Coefficient

BNP Paribas  Truist Financial

Poor diversification

The 3 months correlation between BNP and Truist is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding BNP Paribas SA and Truist Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truist Financial Corp 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 Truist Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Truist Financial Corp has no effect on the direction of BNP Paribas i.e., BNP Paribas and Truist Financial go up and down completely randomly.

Pair Corralation between BNP Paribas and Truist Financial

Assuming the 90 days horizon BNP Paribas is expected to generate 2.03 times less return on investment than Truist Financial. But when comparing it to its historical volatility, BNP Paribas SA is 1.13 times less risky than Truist Financial. It trades about 0.04 of its potential returns per unit of risk. Truist Financial Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,919  in Truist Financial Corp on January 25, 2024 and sell it today you would earn a total of  960.00  from holding Truist Financial Corp or generate 32.89% 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.  Truist Financial Corp

BNP Paribas SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BNP Paribas SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, BNP Paribas may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Truist Financial Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Truist Financial Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Truist Financial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with BNP Paribas and Truist Financial

The main advantage of trading using opposite BNP Paribas and Truist Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BNP Paribas position performs unexpectedly, Truist Financial 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 Truist Financial will offset losses from the drop in Truist Financial's long position.

The idea behind BNP Paribas SA and Truist Financial Corp 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.

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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.