Correlation Between NISSAN CHEMICAL and Veolia Environnement

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

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

Diversification Opportunities for NISSAN CHEMICAL and Veolia Environnement

-0.47

Correlation Coefficient

NISSAN CHEMICAL  Veolia Environnement

Very good diversification

The 3 months correlation between NISSAN and Veolia is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding NISSAN CHEMICAL IND and Veolia Environnement SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veolia Environnement and NISSAN CHEMICAL 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 NISSAN CHEMICAL IND are associated (or correlated) with Veolia Environnement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veolia Environnement has no effect on the direction of NISSAN CHEMICAL i.e., NISSAN CHEMICAL and Veolia Environnement go up and down completely randomly.

Pair Corralation between NISSAN CHEMICAL and Veolia Environnement

Assuming the 90 days trading horizon NISSAN CHEMICAL IND is expected to generate 0.8 times more return on investment than Veolia Environnement. However, NISSAN CHEMICAL IND is 1.25 times less risky than Veolia Environnement. It trades about 0.03 of its potential returns per unit of risk. Veolia Environnement SA is currently generating about -0.08 per unit of risk. If you would invest  3,140  in NISSAN CHEMICAL IND on September 14, 2024 and sell it today you would earn a total of  60.00  from holding NISSAN CHEMICAL IND or generate 1.91% return on investment over 90 days.

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

NISSAN CHEMICAL IND  vs.  Veolia Environnement SA

NISSAN CHEMICAL IND

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NISSAN CHEMICAL IND are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, NISSAN CHEMICAL is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Veolia Environnement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Veolia Environnement SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Veolia Environnement is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NISSAN CHEMICAL and Veolia Environnement

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

The idea behind NISSAN CHEMICAL IND and Veolia Environnement 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.