Correlation Between SGS SA and Bureau Veritas

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

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

Diversification Opportunities for SGS SA and Bureau Veritas

0.42

Correlation Coefficient

SGS SA  Bureau Veritas

Very weak diversification

The 3 months correlation between SGS and Bureau is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding SGS SA and Bureau Veritas SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bureau Veritas SA and SGS 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 SGS SA are associated (or correlated) with Bureau Veritas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bureau Veritas SA has no effect on the direction of SGS SA i.e., SGS SA and Bureau Veritas go up and down completely randomly.

Pair Corralation between SGS SA and Bureau Veritas

Assuming the 90 days horizon SGS SA is expected to generate 1.2 times more return on investment than Bureau Veritas. However, SGS SA is 1.2 times more volatile than Bureau Veritas SA. It trades about 0.04 of its potential returns per unit of risk. Bureau Veritas SA is currently generating about 0.0 per unit of risk. If you would invest  985.00  in SGS SA on December 1, 2024 and sell it today you would earn a total of  35.00  from holding SGS SA or generate 3.55% return on investment over 90 days.

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

SGS SA  vs.  Bureau Veritas SA

SGS SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SGS SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, SGS SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bureau Veritas SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bureau Veritas SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, Bureau Veritas is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SGS SA and Bureau Veritas

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

The idea behind SGS SA and Bureau Veritas 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.