Correlation Between Bouygues and Making Science

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

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

Diversification Opportunities for Bouygues and Making Science

0.26

Correlation Coefficient

Bouygues  Making Science

Modest diversification

The 3 months correlation between Bouygues and Making is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Bouygues SA and Making Science Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Making Science Group 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 Making Science. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Making Science Group has no effect on the direction of Bouygues i.e., Bouygues and Making Science go up and down completely randomly.

Pair Corralation between Bouygues and Making Science

Assuming the 90 days horizon Bouygues SA is expected to under-perform the Making Science. But the stock apears to be less risky and, when comparing its historical volatility, Bouygues SA is 1.08 times less risky than Making Science. The stock trades about -0.13 of its potential returns per unit of risk. The Making Science Group is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  875.00  in Making Science Group on September 26, 2024 and sell it today you would lose (55.00) from holding Making Science Group or give up 6.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Bouygues SA  vs.  Making Science Group

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.

Making Science Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Making Science Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Making Science is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Bouygues and Making Science

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

The idea behind Bouygues SA and Making Science Group 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.