Correlation Between Bouygues and AXA SA

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

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

Diversification Opportunities for Bouygues and AXA SA

0.57

Correlation Coefficient

Bouygues  AXA SA

Very weak diversification

The 3 months correlation between Bouygues and AXA is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Bouygues SA and AXA SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXA 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 AXA SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXA SA has no effect on the direction of Bouygues i.e., Bouygues and AXA SA go up and down completely randomly.

Pair Corralation between Bouygues and AXA SA

Assuming the 90 days horizon Bouygues SA is expected to generate 0.91 times more return on investment than AXA SA. However, Bouygues SA is 1.1 times less risky than AXA SA. It trades about -0.13 of its potential returns per unit of risk. AXA SA is currently generating about -0.23 per unit of risk. If you would invest  2,913  in Bouygues SA on August 31, 2024 and sell it today you would lose (101.00) from holding Bouygues SA or give up 3.47% of portfolio value over 90 days.

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

Bouygues SA  vs.  AXA SA

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

AXA SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Bouygues and AXA SA

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

The idea behind Bouygues SA and AXA 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.