Correlation Between Veolia Environnement and Charter Communications

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

By analyzing existing cross correlation between Veolia Environnement VE and Charter Communications Cl, you can compare the effects of market volatilities on Veolia Environnement and Charter Communications 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 Veolia Environnement with a short position of Charter Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Veolia Environnement and Charter Communications.

Diversification Opportunities for Veolia Environnement and Charter Communications

-0.82

Correlation Coefficient

Veolia Environnement  Charter Communications

Pay attention - limited upside

The 3 months correlation between Veolia and Charter is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Veolia Environnement VE and Charter Communications Cl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications and Veolia Environnement 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 Veolia Environnement VE are associated (or correlated) with Charter Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charter Communications has no effect on the direction of Veolia Environnement i.e., Veolia Environnement and Charter Communications go up and down completely randomly.

Pair Corralation between Veolia Environnement and Charter Communications

Assuming the 90 days trading horizon Veolia Environnement VE is expected to under-perform the Charter Communications. But the stock apears to be less risky and, when comparing its historical volatility, Veolia Environnement VE is 2.21 times less risky than Charter Communications. The stock trades about -0.07 of its potential returns per unit of risk. The Charter Communications Cl is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  33,791  in Charter Communications Cl on September 12, 2024 and sell it today you would earn a total of  4,119  from holding Charter Communications Cl or generate 12.19% return on investment over 90 days.

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

Veolia Environnement VE  vs.  Charter Communications Cl

Veolia Environnement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Veolia Environnement VE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Veolia Environnement is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Charter Communications

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications Cl are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Charter Communications unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Veolia Environnement and Charter Communications

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

The idea behind Veolia Environnement VE and Charter Communications Cl 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.