Correlation Between Bouygues and Engie SA
Can any of the company-specific risk be diversified away by investing in both Bouygues and Engie SA 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 Bouygues and Engie SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bouygues SA and Engie SA, you can compare the effects of market volatilities on Bouygues and Engie SA 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 Bouygues with a short position of Engie SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bouygues and Engie SA.
Diversification Opportunities for Bouygues and Engie SA
Poor diversification
The 3 months correlation between Bouygues and Engie is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Bouygues SA and Engie SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Engie SA and Bouygues 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 Bouygues SA are associated (or correlated) with Engie SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Engie SA has no effect on the direction of Bouygues i.e., Bouygues and Engie SA go up and down completely randomly.
Pair Corralation between Bouygues and Engie SA
Assuming the 90 days horizon Bouygues SA is expected to under-perform the Engie SA. In addition to that, Bouygues is 2.19 times more volatile than Engie SA. It trades about -0.12 of its total potential returns per unit of risk. Engie SA is currently generating about -0.19 per unit of volatility. If you would invest 1,574 in Engie SA on August 27, 2024 and sell it today you would lose (35.00) from holding Engie SA or give up 2.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bouygues SA vs. Engie SA
Performance |
| Timeline |
| Bouygues SA |
| Engie SA |
Bouygues and Engie SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bouygues and Engie SA
The main advantage of trading using opposite Bouygues and Engie SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bouygues position performs unexpectedly, Engie SA 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 Engie SA will offset losses from the drop in Engie SA's long position.The idea behind Bouygues SA and Engie 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.| Engie SA vs. Orange SA | Engie SA vs. Veolia Environnement VE | Engie SA vs. AXA SA | Engie SA vs. TotalEnergies SE |
Check out your portfolio center.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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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