Correlation Between Bouygues and Air Liquide

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

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

Diversification Opportunities for Bouygues and Air Liquide

0.91

Correlation Coefficient

Bouygues  Air Liquide

Almost no diversification

The 3 months correlation between Bouygues and Air is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Bouygues SA and Air Liquide SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Liquide SA and Bouygues 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 Bouygues SA are associated (or correlated) with Air Liquide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Liquide SA has no effect on the direction of Bouygues i.e., Bouygues and Air Liquide go up and down completely randomly.

Pair Corralation between Bouygues and Air Liquide

Assuming the 90 days horizon Bouygues SA is expected to generate 1.04 times more return on investment than Air Liquide. However, Bouygues is 1.04 times more volatile than Air Liquide SA. It trades about 0.37 of its potential returns per unit of risk. Air Liquide SA is currently generating about 0.2 per unit of risk. If you would invest  2,854  in Bouygues SA on December 29, 2024 and sell it today you would earn a total of  837.00  from holding Bouygues SA or generate 29.33% return on investment over 90 days.

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

Bouygues SA  vs.  Air Liquide SA

Bouygues SA

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Bouygues SA are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bouygues sustained solid returns over the last few months and may actually be approaching a breakup point.

Air Liquide SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Liquide SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Air Liquide sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bouygues and Air Liquide

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

The idea behind Bouygues SA and Air Liquide 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.