Correlation Between Bouygues and Thales SA
Can any of the company-specific risk be diversified away by investing in both Bouygues and Thales 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 Thales 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 Thales SA, you can compare the effects of market volatilities on Bouygues and Thales 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 Thales SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bouygues and Thales SA.
Diversification Opportunities for Bouygues and Thales SA
Poor diversification
The 3 months correlation between Bouygues and Thales is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Bouygues SA and Thales SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thales 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 Thales SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thales SA has no effect on the direction of Bouygues i.e., Bouygues and Thales SA go up and down completely randomly.
Pair Corralation between Bouygues and Thales SA
Assuming the 90 days horizon Bouygues is expected to generate 2.53 times less return on investment than Thales SA. But when comparing it to its historical volatility, Bouygues SA is 1.24 times less risky than Thales SA. It trades about 0.02 of its potential returns per unit of risk. Thales SA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 11,388 in Thales SA on October 25, 2024 and sell it today you would earn a total of 3,897 from holding Thales SA or generate 34.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Bouygues SA vs. Thales SA
Performance |
| Timeline |
| Bouygues SA |
| Thales SA |
Bouygues and Thales SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bouygues and Thales SA
The main advantage of trading using opposite Bouygues and Thales SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bouygues position performs unexpectedly, Thales 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 Thales SA will offset losses from the drop in Thales SA's long position.| Bouygues vs. Vinci SA | Bouygues vs. Compagnie de Saint Gobain | Bouygues vs. Orange SA | Bouygues vs. Veolia Environnement VE |
| Thales SA vs. Safran SA | Thales SA vs. Dassault Aviation SA | Thales SA vs. Vinci SA | Thales SA vs. Compagnie de Saint Gobain |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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