Correlation Between Thales SA and Bureau Veritas

Can any of the company-specific risk be diversified away by investing in both Thales 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 Thales 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 Thales SA ADR and Bureau Veritas SA, you can compare the effects of market volatilities on Thales 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 Thales SA with a short position of Bureau Veritas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thales SA and Bureau Veritas.

Diversification Opportunities for Thales SA and Bureau Veritas

0.43

Correlation Coefficient

Thales SA  Bureau Veritas

Very weak diversification

The 3 months correlation between Thales and Bureau is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Thales SA ADR 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 Thales 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 Thales SA ADR 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 Thales SA i.e., Thales SA and Bureau Veritas go up and down completely randomly.

Pair Corralation between Thales SA and Bureau Veritas

Assuming the 90 days horizon Thales SA ADR is expected to under-perform the Bureau Veritas. But the pink sheet apears to be less risky and, when comparing its historical volatility, Thales SA ADR is 1.12 times less risky than Bureau Veritas. The pink sheet trades about -0.32 of its potential returns per unit of risk. The Bureau Veritas SA is currently generating about -0.23 of returns per unit of risk over similar time horizon. If you would invest  6,267  in Bureau Veritas SA on October 7, 2024 and sell it today you would lose (310.00) from holding Bureau Veritas SA or give up 4.95% of portfolio value over 90 days.

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

Thales SA ADR  vs.  Bureau Veritas SA

Thales SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thales SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Bureau Veritas SA

Risk-Adjusted Performance

0 of 100

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 Thales SA and Bureau Veritas

The main advantage of trading using opposite Thales SA and Bureau Veritas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thales 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 Thales SA ADR 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.