Correlation Between Bouygues and Sodexo SA
Can any of the company-specific risk be diversified away by investing in both Bouygues and Sodexo 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 Sodexo 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 Sodexo SA, you can compare the effects of market volatilities on Bouygues and Sodexo 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 Sodexo SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bouygues and Sodexo SA.
Diversification Opportunities for Bouygues and Sodexo SA
Significant diversification
The 3 months correlation between Bouygues and Sodexo is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Bouygues SA and Sodexo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sodexo 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 Sodexo SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sodexo SA has no effect on the direction of Bouygues i.e., Bouygues and Sodexo SA go up and down completely randomly.
Pair Corralation between Bouygues and Sodexo SA
Assuming the 90 days horizon Bouygues SA is expected to under-perform the Sodexo SA. But the stock apears to be less risky and, when comparing its historical volatility, Bouygues SA is 1.08 times less risky than Sodexo SA. The stock trades about -0.15 of its potential returns per unit of risk. The Sodexo SA is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 8,054 in Sodexo SA on September 1, 2024 and sell it today you would lose (194.00) from holding Sodexo SA or give up 2.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.24% |
| Values | Daily Returns |
Bouygues SA vs. Sodexo SA
Performance |
| Timeline |
| Bouygues SA |
| Sodexo SA |
Bouygues and Sodexo SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bouygues and Sodexo SA
The main advantage of trading using opposite Bouygues and Sodexo SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bouygues position performs unexpectedly, Sodexo 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 Sodexo SA will offset losses from the drop in Sodexo SA's long position.The idea behind Bouygues SA and Sodexo 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.| Sodexo SA vs. Accor S A | Sodexo SA vs. Publicis Groupe SA | Sodexo SA vs. Legrand SA | Sodexo SA vs. Pernod Ricard SA |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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