Correlation Between Bureau Veritas and Compagnie

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

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

Diversification Opportunities for Bureau Veritas and Compagnie

-0.49

Correlation Coefficient

Bureau Veritas  Compagnie

Very good diversification

The 3 months correlation between Bureau and Compagnie is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Bureau Veritas SA and Compagnie de Saint Gobain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie de Saint and Bureau Veritas 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 Bureau Veritas SA are associated (or correlated) with Compagnie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie de Saint has no effect on the direction of Bureau Veritas i.e., Bureau Veritas and Compagnie go up and down completely randomly.

Pair Corralation between Bureau Veritas and Compagnie

Assuming the 90 days trading horizon Bureau Veritas SA is expected to under-perform the Compagnie. But the stock apears to be less risky and, when comparing its historical volatility, Bureau Veritas SA is 1.37 times less risky than Compagnie. The stock trades about 0.0 of its potential returns per unit of risk. The Compagnie de Saint Gobain is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  7,802  in Compagnie de Saint Gobain on September 12, 2024 and sell it today you would earn a total of  1,116  from holding Compagnie de Saint Gobain or generate 14.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Bureau Veritas SA  vs.  Compagnie de Saint Gobain

Bureau Veritas SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bureau Veritas SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Bureau Veritas is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Compagnie de Saint

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie de Saint Gobain are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Compagnie sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bureau Veritas and Compagnie

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

The idea behind Bureau Veritas SA and Compagnie de Saint Gobain 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.