Correlation Between Veolia Environnement and Mitie Group

Can any of the company-specific risk be diversified away by investing in both Veolia Environnement and Mitie Group 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 Mitie Group 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 Mitie Group PLC, you can compare the effects of market volatilities on Veolia Environnement and Mitie Group 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 Mitie Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Veolia Environnement and Mitie Group.

Diversification Opportunities for Veolia Environnement and Mitie Group

0.91

Correlation Coefficient

Veolia Environnement  Mitie Group

Almost no diversification

The 3 months correlation between Veolia and Mitie is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Veolia Environnement VE and Mitie Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitie Group PLC 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 Mitie Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitie Group PLC has no effect on the direction of Veolia Environnement i.e., Veolia Environnement and Mitie Group go up and down completely randomly.

Pair Corralation between Veolia Environnement and Mitie Group

Assuming the 90 days trading horizon Veolia Environnement is expected to generate 2.0 times less return on investment than Mitie Group. But when comparing it to its historical volatility, Veolia Environnement VE is 1.59 times less risky than Mitie Group. It trades about 0.04 of its potential returns per unit of risk. Mitie Group PLC is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  7,275  in Mitie Group PLC on September 18, 2024 and sell it today you would earn a total of  3,725  from holding Mitie Group PLC or generate 51.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.8%
Values	Daily Returns

Veolia Environnement VE  vs.  Mitie Group PLC

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.

Mitie Group PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitie Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Veolia Environnement and Mitie Group

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

The idea behind Veolia Environnement VE and Mitie Group PLC 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.