Correlation Between Veolia Environnement and Waste Connections

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

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

Diversification Opportunities for Veolia Environnement and Waste Connections

-0.85

Correlation Coefficient

Veolia Environnement  Waste Connections

Pay attention - limited upside

The 3 months correlation between Veolia and Waste is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Veolia Environnement SA and Waste Connections in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Connections 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 SA are associated (or correlated) with Waste Connections. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Connections has no effect on the direction of Veolia Environnement i.e., Veolia Environnement and Waste Connections go up and down completely randomly.

Pair Corralation between Veolia Environnement and Waste Connections

Assuming the 90 days trading horizon Veolia Environnement is expected to generate 3.55 times less return on investment than Waste Connections. In addition to that, Veolia Environnement is 1.19 times more volatile than Waste Connections. It trades about 0.03 of its total potential returns per unit of risk. Waste Connections is currently generating about 0.13 per unit of volatility. If you would invest  12,240  in Waste Connections on September 14, 2024 and sell it today you would earn a total of  5,355  from holding Waste Connections or generate 43.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.64%
Values	Daily Returns

Veolia Environnement SA  vs.  Waste Connections

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. In spite of latest unsteady performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Waste Connections

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Connections are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Waste Connections is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Veolia Environnement and Waste Connections

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

The idea behind Veolia Environnement SA and Waste Connections 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.