Correlation Between Bouygues and Worldline
Can any of the company-specific risk be diversified away by investing in both Bouygues and Worldline 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 Worldline into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bouygues SA and Worldline SA, you can compare the effects of market volatilities on Bouygues and Worldline 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 Worldline. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bouygues and Worldline.
Diversification Opportunities for Bouygues and Worldline
Poor diversification
The 3 months correlation between Bouygues and Worldline is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Bouygues SA and Worldline SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Worldline 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 Worldline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Worldline SA has no effect on the direction of Bouygues i.e., Bouygues and Worldline go up and down completely randomly.
Pair Corralation between Bouygues and Worldline
Assuming the 90 days horizon Bouygues SA is expected to under-perform the Worldline. But the stock apears to be less risky and, when comparing its historical volatility, Bouygues SA is 2.49 times less risky than Worldline. The stock trades about -0.12 of its potential returns per unit of risk. The Worldline SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 631.00 in Worldline SA on August 27, 2024 and sell it today you would earn a total of 10.00 from holding Worldline SA or generate 1.58% 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. Worldline SA
Performance |
| Timeline |
| Bouygues SA |
| Worldline SA |
Bouygues and Worldline Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bouygues and Worldline
The main advantage of trading using opposite Bouygues and Worldline positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bouygues position performs unexpectedly, Worldline 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 Worldline will offset losses from the drop in Worldline's long position.The idea behind Bouygues SA and Worldline 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.| Worldline vs. Sartorius Stedim Biotech | Worldline vs. Lectra SA | Worldline vs. Teleperformance SE | Worldline vs. Trigano 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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