Correlation Between Great Lakes and Bouygues

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

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

Diversification Opportunities for Great Lakes and Bouygues

-0.67

Correlation Coefficient

Great Lakes  Bouygues

Excellent diversification

The 3 months correlation between Great and Bouygues is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Great Lakes Dredge and Bouygues SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bouygues SA and Great Lakes 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 Great Lakes Dredge 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 Great Lakes i.e., Great Lakes and Bouygues go up and down completely randomly.

Pair Corralation between Great Lakes and Bouygues

Given the investment horizon of 90 days Great Lakes Dredge is expected to under-perform the Bouygues. In addition to that, Great Lakes is 1.73 times more volatile than Bouygues SA. It trades about -0.09 of its total potential returns per unit of risk. Bouygues SA is currently generating about 0.23 per unit of volatility. If you would invest  2,956  in Bouygues SA on December 29, 2024 and sell it today you would earn a total of  884.00  from holding Bouygues SA or generate 29.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	91.8%
Values	Daily Returns

Great Lakes Dredge  vs.  Bouygues SA

Great Lakes Dredge

Risk-Adjusted Performance

Very Weak

Over the last 90 days Great Lakes Dredge has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Bouygues SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bouygues SA are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Bouygues reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Great Lakes and Bouygues

The main advantage of trading using opposite Great Lakes and Bouygues positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Lakes 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 Great Lakes Dredge 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.