Correlation Between Bouygues and Vallourec

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

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

Diversification Opportunities for Bouygues and Vallourec

-0.19

Correlation Coefficient

Bouygues  Vallourec

Good diversification

The 3 months correlation between Bouygues and Vallourec is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Bouygues SA and Vallourec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vallourec 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 Vallourec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vallourec has no effect on the direction of Bouygues i.e., Bouygues and Vallourec go up and down completely randomly.

Pair Corralation between Bouygues and Vallourec

Assuming the 90 days horizon Bouygues SA is expected to generate 0.54 times more return on investment than Vallourec. However, Bouygues SA is 1.86 times less risky than Vallourec. It trades about 0.37 of its potential returns per unit of risk. Vallourec is currently generating about 0.07 per unit of risk. If you would invest  2,854  in Bouygues SA on December 31, 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Bouygues SA  vs.  Vallourec

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.

Vallourec

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vallourec are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Vallourec may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Pair Trading with Bouygues and Vallourec

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

The idea behind Bouygues SA and Vallourec 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.