Correlation Between Fifth Third and BNP Paribas

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

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

Diversification Opportunities for Fifth Third and BNP Paribas

0.17

Correlation Coefficient

Fifth Third  BNP Paribas

Average diversification

The 3 months correlation between Fifth and BNP is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Fifth Third Bancorp 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 Fifth Third 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 Fifth Third Bancorp 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 Fifth Third i.e., Fifth Third and BNP Paribas go up and down completely randomly.

Pair Corralation between Fifth Third and BNP Paribas

Assuming the 90 days horizon Fifth Third Bancorp is expected to under-perform the BNP Paribas. But the preferred stock apears to be less risky and, when comparing its historical volatility, Fifth Third Bancorp is 1.96 times less risky than BNP Paribas. The preferred stock trades about -0.14 of its potential returns per unit of risk. The BNP Paribas SA is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  2,988  in BNP Paribas SA on January 19, 2024 and sell it today you would earn a total of  437.00  from holding BNP Paribas SA or generate 14.63% return on investment over 90 days.

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

Fifth Third Bancorp  vs.  BNP Paribas SA

Fifth Third Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fifth Third Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, Fifth Third is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

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.

Pair Trading with Fifth Third and BNP Paribas

The main advantage of trading using opposite Fifth Third and BNP Paribas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fifth Third 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 Fifth Third Bancorp 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.