Correlation Between Boiron SA and Eutelsat Communications

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

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

Diversification Opportunities for Boiron SA and Eutelsat Communications

-0.54

Correlation Coefficient

Boiron SA  Eutelsat Communications

Excellent diversification

The 3 months correlation between Boiron and Eutelsat is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Boiron SA and Eutelsat Communications SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eutelsat Communications and Boiron SA 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 Boiron SA are associated (or correlated) with Eutelsat Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eutelsat Communications has no effect on the direction of Boiron SA i.e., Boiron SA and Eutelsat Communications go up and down completely randomly.

Pair Corralation between Boiron SA and Eutelsat Communications

Assuming the 90 days trading horizon Boiron SA is expected to under-perform the Eutelsat Communications. But the stock apears to be less risky and, when comparing its historical volatility, Boiron SA is 11.5 times less risky than Eutelsat Communications. The stock trades about -0.05 of its potential returns per unit of risk. The Eutelsat Communications SA is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  227.00  in Eutelsat Communications SA on December 30, 2024 and sell it today you would earn a total of  180.00  from holding Eutelsat Communications SA or generate 79.3% return on investment over 90 days.

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

Boiron SA  vs.  Eutelsat Communications SA

Boiron SA

Risk-Adjusted Performance

Very Weak

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

Eutelsat Communications

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eutelsat Communications SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Eutelsat Communications sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boiron SA and Eutelsat Communications

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

The idea behind Boiron SA and Eutelsat Communications 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.