Correlation Between Avista and Veolia Environnement

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

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

Diversification Opportunities for Avista and Veolia Environnement

0.22

Correlation Coefficient

Avista  Veolia Environnement

Modest diversification

The 3 months correlation between Avista and Veolia is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Avista and Veolia Environnement SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veolia Environnement and Avista 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 Avista 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 Avista i.e., Avista and Veolia Environnement go up and down completely randomly.

Pair Corralation between Avista and Veolia Environnement

Considering the 90-day investment horizon Avista is expected to generate 0.94 times more return on investment than Veolia Environnement. However, Avista is 1.06 times less risky than Veolia Environnement. It trades about -0.02 of its potential returns per unit of risk. Veolia Environnement SA is currently generating about -0.16 per unit of risk. If you would invest  3,726  in Avista on October 3, 2024 and sell it today you would lose (63.00) from holding Avista or give up 1.69% of portfolio value over 90 days.

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

Avista  vs.  Veolia Environnement SA

Avista

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avista has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Avista is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the 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. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Avista and Veolia Environnement

The main advantage of trading using opposite Avista and Veolia Environnement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avista 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 Avista 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.