Correlation Between Bureau Veritas and Wendel

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

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

Diversification Opportunities for Bureau Veritas and Wendel

0.71

Correlation Coefficient

Bureau Veritas  Wendel

Poor diversification

The 3 months correlation between Bureau and Wendel is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Bureau Veritas SA and Wendel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wendel and Bureau Veritas 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 Bureau Veritas SA are associated (or correlated) with Wendel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wendel has no effect on the direction of Bureau Veritas i.e., Bureau Veritas and Wendel go up and down completely randomly.

Pair Corralation between Bureau Veritas and Wendel

Assuming the 90 days trading horizon Bureau Veritas is expected to generate 3.83 times less return on investment than Wendel. But when comparing it to its historical volatility, Bureau Veritas SA is 1.01 times less risky than Wendel. It trades about 0.01 of its potential returns per unit of risk. Wendel is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  9,365  in Wendel on November 30, 2024 and sell it today you would earn a total of  295.00  from holding Wendel or generate 3.15% return on investment over 90 days.

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

Bureau Veritas SA  vs.  Wendel

Bureau Veritas SA

Risk-Adjusted Performance

Weak

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

Wendel

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wendel are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Wendel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bureau Veritas and Wendel

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

The idea behind Bureau Veritas SA and Wendel 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.