Correlation Between Bouygues and Soditech

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

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

Diversification Opportunities for Bouygues and Soditech

0.4

Correlation Coefficient

Bouygues  Soditech

Very weak diversification

The 3 months correlation between Bouygues and Soditech is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Bouygues SA and Soditech SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soditech 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 Soditech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soditech SA has no effect on the direction of Bouygues i.e., Bouygues and Soditech go up and down completely randomly.

Pair Corralation between Bouygues and Soditech

Assuming the 90 days horizon Bouygues is expected to generate 4.03 times less return on investment than Soditech. But when comparing it to its historical volatility, Bouygues SA is 4.98 times less risky than Soditech. It trades about 0.02 of its potential returns per unit of risk. Soditech SA is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  166.00  in Soditech SA on September 26, 2024 and sell it today you would lose (62.00) from holding Soditech SA or give up 37.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.02%
Values	Daily Returns

Bouygues SA  vs.  Soditech SA

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Soditech SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Soditech SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Bouygues and Soditech

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

The idea behind Bouygues SA and Soditech 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.