Correlation Between AXA SA and Veolia Environnement

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

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

Diversification Opportunities for AXA SA and Veolia Environnement

0.0

Correlation Coefficient

AXA SA  Veolia Environnement

Pay attention - limited upside

The 3 months correlation between AXA and Veolia is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding AXA SA and Veolia Environnement VE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veolia Environnement and AXA SA 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 AXA SA 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 AXA SA i.e., AXA SA and Veolia Environnement go up and down completely randomly.

Pair Corralation between AXA SA and Veolia Environnement

Assuming the 90 days horizon AXA SA is expected to generate 0.71 times more return on investment than Veolia Environnement. However, AXA SA is 1.4 times less risky than Veolia Environnement. It trades about 0.37 of its potential returns per unit of risk. Veolia Environnement VE is currently generating about 0.05 per unit of risk. If you would invest  3,534  in AXA SA on November 20, 2024 and sell it today you would earn a total of  225.00  from holding AXA SA or generate 6.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

AXA SA  vs.  Veolia Environnement VE

AXA SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AXA SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, AXA SA may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Veolia Environnement

Risk-Adjusted Performance

Very Weak

Over the last 90 days Veolia Environnement VE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Veolia Environnement is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AXA SA and Veolia Environnement

The main advantage of trading using opposite AXA SA and Veolia Environnement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AXA SA 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 AXA SA 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.