Correlation Between Automatic Data and Veolia Environnement

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

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

Diversification Opportunities for Automatic Data and Veolia Environnement

-0.21

Correlation Coefficient

Automatic Data  Veolia Environnement

Very good diversification

The 3 months correlation between Automatic and Veolia is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Veolia Environnement VE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veolia Environnement and Automatic Data 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 Automatic Data Processing 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 Automatic Data i.e., Automatic Data and Veolia Environnement go up and down completely randomly.

Pair Corralation between Automatic Data and Veolia Environnement

Assuming the 90 days trading horizon Automatic Data Processing is expected to generate 5.69 times more return on investment than Veolia Environnement. However, Automatic Data is 5.69 times more volatile than Veolia Environnement VE. It trades about 0.03 of its potential returns per unit of risk. Veolia Environnement VE is currently generating about 0.02 per unit of risk. If you would invest  21,278  in Automatic Data Processing on October 21, 2024 and sell it today you would earn a total of  8,504  from holding Automatic Data Processing or generate 39.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Automatic Data Processing  vs.  Veolia Environnement VE

Automatic Data Processing

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Automatic Data is not utilizing all of its potentials. The latest 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 VE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Automatic Data and Veolia Environnement

The main advantage of trading using opposite Automatic Data and Veolia Environnement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Data 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 Automatic Data Processing 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.