Correlation Between Bouygues and Union Technologies

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

By analyzing existing cross correlation between Bouygues SA and Union Technologies Informatique, you can compare the effects of market volatilities on Bouygues and Union Technologies 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 Union Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bouygues and Union Technologies.

Diversification Opportunities for Bouygues and Union Technologies

-0.06

Correlation Coefficient

Bouygues  Union Technologies

Good diversification

The 3 months correlation between Bouygues and Union is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Bouygues SA and Union Technologies Informatiqu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Technologies 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 Union Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Technologies has no effect on the direction of Bouygues i.e., Bouygues and Union Technologies go up and down completely randomly.

Pair Corralation between Bouygues and Union Technologies

Assuming the 90 days horizon Bouygues SA is expected to generate 0.28 times more return on investment than Union Technologies. However, Bouygues SA is 3.55 times less risky than Union Technologies. It trades about -0.01 of its potential returns per unit of risk. Union Technologies Informatique is currently generating about -0.04 per unit of risk. If you would invest  3,071  in Bouygues SA on October 5, 2024 and sell it today you would lose (198.00) from holding Bouygues SA or give up 6.45% of portfolio value over 90 days.

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

Bouygues SA  vs.  Union Technologies Informatiqu

Bouygues SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Union Technologies

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Union Technologies Informatique are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Union Technologies may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Bouygues and Union Technologies

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

The idea behind Bouygues SA and Union Technologies Informatique 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 Transaction History module to view history of all your transactions and understand their impact on performance.