Correlation Between Heartland Financial and Veolia Environnement

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

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

Diversification Opportunities for Heartland Financial and Veolia Environnement

-0.8

Correlation Coefficient

Heartland Financial  Veolia Environnement

Pay attention - limited upside

The 3 months correlation between Heartland and Veolia is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Heartland Financial USA and Veolia Environnement SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veolia Environnement and Heartland Financial 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 Heartland Financial USA 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 Heartland Financial i.e., Heartland Financial and Veolia Environnement go up and down completely randomly.

Pair Corralation between Heartland Financial and Veolia Environnement

Assuming the 90 days horizon Heartland Financial USA is expected to generate 1.75 times more return on investment than Veolia Environnement. However, Heartland Financial is 1.75 times more volatile than Veolia Environnement SA. It trades about 0.05 of its potential returns per unit of risk. Veolia Environnement SA is currently generating about 0.04 per unit of risk. If you would invest  4,160  in Heartland Financial USA on September 2, 2024 and sell it today you would earn a total of  2,190  from holding Heartland Financial USA or generate 52.64% return on investment over 90 days.

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

Heartland Financial USA  vs.  Veolia Environnement SA

Heartland Financial USA

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Heartland Financial USA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Heartland Financial reported solid returns over the last few months and may actually be approaching a breakup point.

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Heartland Financial and Veolia Environnement

The main advantage of trading using opposite Heartland Financial and Veolia Environnement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heartland Financial 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 Heartland Financial USA 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .