Correlation Between Adomos SA and Bouygues

Can any of the company-specific risk be diversified away by investing in both Adomos SA and Bouygues 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 Adomos SA and Bouygues into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Adomos SA and Bouygues SA, you can compare the effects of market volatilities on Adomos SA and Bouygues 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 Adomos SA with a short position of Bouygues. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adomos SA and Bouygues.

Diversification Opportunities for Adomos SA and Bouygues

0.08

Correlation Coefficient

Adomos SA  Bouygues

Significant diversification

The 3 months correlation between Adomos and Bouygues is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Adomos SA and Bouygues SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bouygues SA and Adomos SA 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 Adomos SA are associated (or correlated) with Bouygues. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bouygues SA has no effect on the direction of Adomos SA i.e., Adomos SA and Bouygues go up and down completely randomly.

Pair Corralation between Adomos SA and Bouygues

Assuming the 90 days trading horizon Adomos SA is expected to generate 11.62 times more return on investment than Bouygues. However, Adomos SA is 11.62 times more volatile than Bouygues SA. It trades about 0.06 of its potential returns per unit of risk. Bouygues SA is currently generating about -0.12 per unit of risk. If you would invest  0.02  in Adomos SA on September 27, 2024 and sell it today you would earn a total of  0.00  from holding Adomos SA or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Adomos SA  vs.  Bouygues SA

Adomos SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Adomos SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Adomos SA reported solid returns over the last few months and may actually be approaching a breakup point.

Bouygues SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bouygues SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Adomos SA and Bouygues

The main advantage of trading using opposite Adomos SA and Bouygues positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adomos SA position performs unexpectedly, Bouygues 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 Bouygues will offset losses from the drop in Bouygues' long position.

The idea behind Adomos SA and Bouygues 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.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.