Correlation Between US Bancorp and BNP Paribas

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

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

Diversification Opportunities for US Bancorp and BNP Paribas

0.47

Correlation Coefficient

US Bancorp  BNP Paribas

Very weak diversification

The 3 months correlation between USB and BNP is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding US 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 US Bancorp 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 US 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 US Bancorp i.e., US Bancorp and BNP Paribas go up and down completely randomly.

Pair Corralation between US Bancorp and BNP Paribas

Considering the 90-day investment horizon US Bancorp is expected to under-perform the BNP Paribas. In addition to that, US Bancorp is 1.18 times more volatile than BNP Paribas SA. It trades about -0.14 of its total potential returns per unit of risk. BNP Paribas SA is currently generating about 0.13 per unit of volatility. If you would invest  3,631  in BNP Paribas SA on February 9, 2024 and sell it today you would earn a total of  136.00  from holding BNP Paribas SA or generate 3.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

US Bancorp  vs.  BNP Paribas SA

US Bancorp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in US Bancorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, US Bancorp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BNP Paribas SA

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in BNP Paribas SA are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, BNP Paribas showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with US Bancorp and BNP Paribas

The main advantage of trading using opposite US Bancorp and BNP Paribas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Bancorp 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 US 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.