Correlation Between Seche Environnem and Veolia Environnement

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

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

Diversification Opportunities for Seche Environnem and Veolia Environnement

0.65

Correlation Coefficient

Seche Environnem  Veolia Environnement

Poor diversification

The 3 months correlation between Seche and Veolia is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Seche Environnem and Veolia Environnement VE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veolia Environnement and Seche Environnem 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 Seche Environnem 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 Seche Environnem i.e., Seche Environnem and Veolia Environnement go up and down completely randomly.

Pair Corralation between Seche Environnem and Veolia Environnement

Assuming the 90 days trading horizon Seche Environnem is expected to under-perform the Veolia Environnement. In addition to that, Seche Environnem is 1.59 times more volatile than Veolia Environnement VE. It trades about -0.07 of its total potential returns per unit of risk. Veolia Environnement VE is currently generating about 0.01 per unit of volatility. If you would invest  2,770  in Veolia Environnement VE on September 15, 2024 and sell it today you would earn a total of  16.00  from holding Veolia Environnement VE or generate 0.58% return on investment over 90 days.

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

Seche Environnem  vs.  Veolia Environnement VE

Seche Environnem

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seche Environnem 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.

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. Despite latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Seche Environnem and Veolia Environnement

The main advantage of trading using opposite Seche Environnem and Veolia Environnement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seche Environnem 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 Seche Environnem and Veolia Environnement VE 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.