Correlation Between Bouygues and Manitou BF

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

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

Diversification Opportunities for Bouygues and Manitou BF

0.97

Correlation Coefficient

Bouygues  Manitou BF

Almost no diversification

The 3 months correlation between Bouygues and Manitou is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Bouygues SA and Manitou BF SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manitou BF 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 Manitou BF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manitou BF SA has no effect on the direction of Bouygues i.e., Bouygues and Manitou BF go up and down completely randomly.

Pair Corralation between Bouygues and Manitou BF

Assuming the 90 days horizon Bouygues is expected to generate 2.25 times less return on investment than Manitou BF. But when comparing it to its historical volatility, Bouygues SA is 2.86 times less risky than Manitou BF. It trades about 0.37 of its potential returns per unit of risk. Manitou BF SA is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  1,540  in Manitou BF SA on December 1, 2024 and sell it today you would earn a total of  730.00  from holding Manitou BF SA or generate 47.4% 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.  Manitou BF 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.

Manitou BF SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Manitou BF SA are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Manitou BF sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bouygues and Manitou BF

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

The idea behind Bouygues SA and Manitou BF 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.