Correlation Between Bureau Veritas and Equifax

Can any of the company-specific risk be diversified away by investing in both Bureau Veritas and Equifax 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 Equifax 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 Equifax, you can compare the effects of market volatilities on Bureau Veritas and Equifax 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 Equifax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bureau Veritas and Equifax.

Diversification Opportunities for Bureau Veritas and Equifax

0.88

Correlation Coefficient

Bureau Veritas  Equifax

Very poor diversification

The 3 months correlation between Bureau and Equifax is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Bureau Veritas SA and Equifax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equifax 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 Equifax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equifax has no effect on the direction of Bureau Veritas i.e., Bureau Veritas and Equifax go up and down completely randomly.

Pair Corralation between Bureau Veritas and Equifax

Assuming the 90 days horizon Bureau Veritas is expected to generate 2.04 times less return on investment than Equifax. But when comparing it to its historical volatility, Bureau Veritas SA is 1.45 times less risky than Equifax. It trades about 0.26 of its potential returns per unit of risk. Equifax is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  24,491  in Equifax on September 18, 2024 and sell it today you would earn a total of  2,859  from holding Equifax or generate 11.67% return on investment over 90 days.

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

Bureau Veritas SA  vs.  Equifax

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. In spite of fairly strong fundamental drivers, Bureau Veritas is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Equifax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equifax has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's technical and fundamental 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 Bureau Veritas and Equifax

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

The idea behind Bureau Veritas SA and Equifax 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.