Correlation Between Sodexo SA and Bouygues

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

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

Diversification Opportunities for Sodexo SA and Bouygues

-0.4

Correlation Coefficient

Sodexo SA  Bouygues

Very good diversification

The 3 months correlation between Sodexo and Bouygues is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Sodexo SA and Bouygues SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bouygues SA and Sodexo 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 Sodexo 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 Sodexo SA i.e., Sodexo SA and Bouygues go up and down completely randomly.

Pair Corralation between Sodexo SA and Bouygues

Assuming the 90 days horizon Sodexo SA is expected to under-perform the Bouygues. In addition to that, Sodexo SA is 2.36 times more volatile than Bouygues SA. It trades about -0.14 of its total potential returns per unit of risk. Bouygues SA is currently generating about 0.36 per unit of volatility. If you would invest  2,853  in Bouygues SA on December 27, 2024 and sell it today you would earn a total of  790.00  from holding Bouygues SA or generate 27.69% return on investment over 90 days.

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

Sodexo SA  vs.  Bouygues SA

Sodexo SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sodexo 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 basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Bouygues SA

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Bouygues SA are ranked lower than 28 (%) 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.

Pair Trading with Sodexo SA and Bouygues

The main advantage of trading using opposite Sodexo SA and Bouygues positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sodexo 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 Sodexo 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 Transaction History module to view history of all your transactions and understand their impact on performance.