Correlation Between Engie SA and Bouygues

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

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

Diversification Opportunities for Engie SA and Bouygues

0.67

Correlation Coefficient

Engie SA  Bouygues

Poor diversification

The 3 months correlation between Engie and Bouygues is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Engie SA and Bouygues SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bouygues SA and Engie SA 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 Engie SA are associated (or correlated) with Bouygues. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bouygues SA has no effect on the direction of Engie SA i.e., Engie SA and Bouygues go up and down completely randomly.

Pair Corralation between Engie SA and Bouygues

Assuming the 90 days trading horizon Engie SA is expected to generate 9.94 times less return on investment than Bouygues. In addition to that, Engie SA is 1.05 times more volatile than Bouygues SA. It trades about 0.02 of its total potential returns per unit of risk. Bouygues SA is currently generating about 0.22 per unit of volatility. If you would invest  2,899  in Bouygues SA on November 20, 2024 and sell it today you would earn a total of  339.00  from holding Bouygues SA or generate 11.69% return on investment over 90 days.

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

Engie SA  vs.  Bouygues SA

Engie SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Engie SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Engie SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bouygues SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bouygues SA are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bouygues may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Engie SA and Bouygues

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

The idea behind Engie SA and Bouygues 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.