Correlation Between BNP Paribas and PNC Financial

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

Diversification Opportunities for BNP Paribas and PNC Financial

0.77

Correlation Coefficient

BNP Paribas  PNC Financial

Poor diversification

The 3 months correlation between BNP and PNC is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding BNP Paribas SA and PNC Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PNC Financial Services 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 PNC Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PNC Financial Services has no effect on the direction of BNP Paribas i.e., BNP Paribas and PNC Financial go up and down completely randomly.

Pair Corralation between BNP Paribas and PNC Financial

Assuming the 90 days horizon BNP Paribas SA is expected to generate 0.73 times more return on investment than PNC Financial. However, BNP Paribas SA is 1.37 times less risky than PNC Financial. It trades about 0.08 of its potential returns per unit of risk. PNC Financial Services is currently generating about -0.02 per unit of risk. If you would invest  3,357  in BNP Paribas SA on January 19, 2024 and sell it today you would earn a total of  68.00  from holding BNP Paribas SA or generate 2.03% 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.  PNC Financial Services

BNP Paribas SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BNP Paribas SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, BNP Paribas is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

PNC Financial Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PNC Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, PNC 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 PNC Financial

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

The idea behind BNP Paribas SA and PNC Financial Services 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.