Correlation Between BNP Paribas and Commerzbank

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

Diversification Opportunities for BNP Paribas and Commerzbank

0.18

Correlation Coefficient

BNP Paribas  Commerzbank

Average diversification

The 3 months correlation between BNP and Commerzbank is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding BNP Paribas SA and Commerzbank AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commerzbank AG 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 Commerzbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commerzbank AG has no effect on the direction of BNP Paribas i.e., BNP Paribas and Commerzbank go up and down completely randomly.

Pair Corralation between BNP Paribas and Commerzbank

Assuming the 90 days trading horizon BNP Paribas SA is expected to under-perform the Commerzbank. But the stock apears to be less risky and, when comparing its historical volatility, BNP Paribas SA is 1.88 times less risky than Commerzbank. The stock trades about -0.1 of its potential returns per unit of risk. The Commerzbank AG is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,250  in Commerzbank AG on September 4, 2024 and sell it today you would earn a total of  180.00  from holding Commerzbank AG or generate 14.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

BNP Paribas SA  vs.  Commerzbank AG

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. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Commerzbank AG

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Commerzbank AG are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Commerzbank unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BNP Paribas and Commerzbank

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

The idea behind BNP Paribas SA and Commerzbank AG 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.