Correlation Between Derichebourg and Veolia Environnement

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

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

Diversification Opportunities for Derichebourg and Veolia Environnement

0.04

Correlation Coefficient

Derichebourg  Veolia Environnement

Significant diversification

The 3 months correlation between Derichebourg and Veolia is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Derichebourg and Veolia Environnement VE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veolia Environnement and Derichebourg 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 Derichebourg 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 Derichebourg i.e., Derichebourg and Veolia Environnement go up and down completely randomly.

Pair Corralation between Derichebourg and Veolia Environnement

Assuming the 90 days trading horizon Derichebourg is expected to generate 1.31 times less return on investment than Veolia Environnement. In addition to that, Derichebourg is 1.7 times more volatile than Veolia Environnement VE. It trades about 0.08 of its total potential returns per unit of risk. Veolia Environnement VE is currently generating about 0.17 per unit of volatility. If you would invest  2,755  in Veolia Environnement VE on December 2, 2024 and sell it today you would earn a total of  121.00  from holding Veolia Environnement VE or generate 4.39% return on investment over 90 days.

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

Derichebourg  vs.  Veolia Environnement VE

Derichebourg

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Derichebourg are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Derichebourg sustained solid returns over the last few months and may actually be approaching a breakup point.

Veolia Environnement

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Veolia Environnement VE are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. 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 Derichebourg and Veolia Environnement

The main advantage of trading using opposite Derichebourg and Veolia Environnement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Derichebourg 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 Derichebourg 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.