Correlation Between UniCredit SpA and BNP Paribas

Can any of the company-specific risk be diversified away by investing in both UniCredit SpA 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 UniCredit SpA and BNP Paribas into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between UniCredit SpA and BNP Paribas SA, you can compare the effects of market volatilities on UniCredit SpA 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 UniCredit SpA with a short position of BNP Paribas. Check out your portfolio center. Please also check ongoing floating volatility patterns of UniCredit SpA and BNP Paribas.

Diversification Opportunities for UniCredit SpA and BNP Paribas

0.85

Correlation Coefficient

UniCredit SpA  BNP Paribas

Very poor diversification

The 3 months correlation between UniCredit and BNP is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding UniCredit SpA 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 UniCredit SpA 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 UniCredit SpA 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 UniCredit SpA i.e., UniCredit SpA and BNP Paribas go up and down completely randomly.

Pair Corralation between UniCredit SpA and BNP Paribas

Assuming the 90 days trading horizon UniCredit SpA is expected to generate 1.11 times more return on investment than BNP Paribas. However, UniCredit SpA is 1.11 times more volatile than BNP Paribas SA. It trades about -0.1 of its potential returns per unit of risk. BNP Paribas SA is currently generating about -0.33 per unit of risk. If you would invest  3,600  in UniCredit SpA on March 21, 2024 and sell it today you would lose (191.00) from holding UniCredit SpA or give up 5.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

UniCredit SpA  vs.  BNP Paribas SA

UniCredit SpA

Risk-Adjusted Performance

4 of 100

Insignificant

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

BNP Paribas SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BNP Paribas SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, BNP Paribas is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with UniCredit SpA and BNP Paribas

The main advantage of trading using opposite UniCredit SpA and BNP Paribas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UniCredit SpA 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 UniCredit SpA 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.

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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.