Correlation Between Bouygues and Dassault Systemes

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

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

Diversification Opportunities for Bouygues and Dassault Systemes

0.61

Correlation Coefficient

Bouygues  Dassault Systemes

Poor diversification

The 3 months correlation between Bouygues and Dassault is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Bouygues SA and Dassault Systemes SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dassault Systemes 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 Dassault Systemes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dassault Systemes has no effect on the direction of Bouygues i.e., Bouygues and Dassault Systemes go up and down completely randomly.

Pair Corralation between Bouygues and Dassault Systemes

Assuming the 90 days horizon Bouygues SA is expected to under-perform the Dassault Systemes. But the stock apears to be less risky and, when comparing its historical volatility, Bouygues SA is 1.24 times less risky than Dassault Systemes. The stock trades about -0.17 of its potential returns per unit of risk. The Dassault Systemes SE is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  3,430  in Dassault Systemes SE on September 4, 2024 and sell it today you would lose (235.00) from holding Dassault Systemes SE or give up 6.85% of portfolio value over 90 days.

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

Bouygues SA  vs.  Dassault Systemes SE

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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Dassault Systemes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dassault Systemes SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Dassault Systemes 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 Dassault Systemes

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

The idea behind Bouygues SA and Dassault Systemes SE 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.