Correlation Between Bouygues and Legrand SA
Can any of the company-specific risk be diversified away by investing in both Bouygues and Legrand 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 Legrand 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 Legrand SA, you can compare the effects of market volatilities on Bouygues and Legrand 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 Legrand SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bouygues and Legrand SA.
Diversification Opportunities for Bouygues and Legrand SA
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bouygues and Legrand is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Bouygues SA and Legrand SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legrand 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 Legrand SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legrand SA has no effect on the direction of Bouygues i.e., Bouygues and Legrand SA go up and down completely randomly.
Pair Corralation between Bouygues and Legrand SA
Assuming the 90 days horizon Bouygues is expected to generate 159.5 times less return on investment than Legrand SA. But when comparing it to its historical volatility, Bouygues SA is 1.22 times less risky than Legrand SA. It trades about 0.0 of its potential returns per unit of risk. Legrand SA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 9,162 in Legrand SA on November 5, 2024 and sell it today you would earn a total of 490.00 from holding Legrand SA or generate 5.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bouygues SA vs. Legrand SA
Performance |
| Timeline |
| Bouygues SA |
| Legrand SA |
Bouygues and Legrand SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bouygues and Legrand SA
The main advantage of trading using opposite Bouygues and Legrand SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bouygues position performs unexpectedly, Legrand 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 Legrand SA will offset losses from the drop in Legrand SA's long position.| Bouygues vs. Vinci SA | Bouygues vs. Compagnie de Saint Gobain | Bouygues vs. Orange SA | Bouygues vs. Veolia Environnement VE |
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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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