Correlation Between Socit BIC and Bnteau SA

Can any of the company-specific risk be diversified away by investing in both Socit BIC and Bnteau SA 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 Socit BIC and Bnteau SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Socit BIC and Bnteau SA

0.35

Correlation Coefficient

Socit BIC  Bnteau SA

Weak diversification

The 3 months correlation between Socit and Bnteau is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Socit BIC SA and Bnteau SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bnteau SA and Socit BIC 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 Socit BIC SA are associated (or correlated) with Bnteau SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bnteau SA has no effect on the direction of Socit BIC i.e., Socit BIC and Bnteau SA go up and down completely randomly.

Pair Corralation between Socit BIC and Bnteau SA

Assuming the 90 days horizon Socit BIC SA is expected to under-perform the Bnteau SA. But the stock apears to be less risky and, when comparing its historical volatility, Socit BIC SA is 2.77 times less risky than Bnteau SA. The stock trades about -0.19 of its potential returns per unit of risk. The Bnteau SA is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  916.00  in Bnteau SA on November 28, 2024 and sell it today you would earn a total of  92.00  from holding Bnteau SA or generate 10.04% return on investment over 90 days.

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

Socit BIC SA  vs.  Bnteau SA

Socit BIC SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Socit BIC SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Socit BIC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bnteau SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bnteau SA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bnteau SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Socit BIC and Bnteau SA

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

The idea behind Socit BIC SA and Bnteau 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.