Correlation Between Aqua Metals and Veolia Environnement

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

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

Diversification Opportunities for Aqua Metals and Veolia Environnement

0.87

Correlation Coefficient

Aqua Metals  Veolia Environnement

Very poor diversification

The 3 months correlation between Aqua and Veolia is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Aqua Metals and Veolia Environnement SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veolia Environnement and Aqua Metals 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 Aqua Metals 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 Aqua Metals i.e., Aqua Metals and Veolia Environnement go up and down completely randomly.

Pair Corralation between Aqua Metals and Veolia Environnement

Given the investment horizon of 90 days Aqua Metals is expected to under-perform the Veolia Environnement. In addition to that, Aqua Metals is 5.39 times more volatile than Veolia Environnement SA. It trades about -0.1 of its total potential returns per unit of risk. Veolia Environnement SA is currently generating about -0.03 per unit of volatility. If you would invest  3,018  in Veolia Environnement SA on September 25, 2024 and sell it today you would lose (201.00) from holding Veolia Environnement SA or give up 6.66% of portfolio value over 90 days.

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

Aqua Metals  vs.  Veolia Environnement SA

Aqua Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aqua Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Aqua Metals and Veolia Environnement

The main advantage of trading using opposite Aqua Metals and Veolia Environnement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aqua Metals 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 Aqua Metals 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.