Correlation Between Edenred SA and Bureau Veritas

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

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

Diversification Opportunities for Edenred SA and Bureau Veritas

0.44

Correlation Coefficient

Edenred SA  Bureau Veritas

Very weak diversification

The 3 months correlation between Edenred and Bureau is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Edenred SA and Bureau Veritas SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bureau Veritas SA and Edenred 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 Edenred SA are associated (or correlated) with Bureau Veritas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bureau Veritas SA has no effect on the direction of Edenred SA i.e., Edenred SA and Bureau Veritas go up and down completely randomly.

Pair Corralation between Edenred SA and Bureau Veritas

Assuming the 90 days trading horizon Edenred SA is expected to under-perform the Bureau Veritas. In addition to that, Edenred SA is 1.48 times more volatile than Bureau Veritas SA. It trades about -0.01 of its total potential returns per unit of risk. Bureau Veritas SA is currently generating about 0.03 per unit of volatility. If you would invest  2,880  in Bureau Veritas SA on November 29, 2024 and sell it today you would earn a total of  56.00  from holding Bureau Veritas SA or generate 1.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Edenred SA  vs.  Bureau Veritas SA

Edenred SA

Risk-Adjusted Performance

Very Weak

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

Bureau Veritas SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bureau Veritas SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Edenred SA and Bureau Veritas

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

The idea behind Edenred SA and Bureau Veritas 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.