Correlation Between Elior SCA and Verallia

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

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

Diversification Opportunities for Elior SCA and Verallia

0.33

Correlation Coefficient

Elior SCA  Verallia

Weak diversification

The 3 months correlation between Elior and Verallia is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Elior SCA and Verallia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verallia and Elior SCA 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 Elior SCA are associated (or correlated) with Verallia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verallia has no effect on the direction of Elior SCA i.e., Elior SCA and Verallia go up and down completely randomly.

Pair Corralation between Elior SCA and Verallia

Assuming the 90 days trading horizon Elior SCA is expected to under-perform the Verallia. In addition to that, Elior SCA is 1.09 times more volatile than Verallia. It trades about -0.04 of its total potential returns per unit of risk. Verallia is currently generating about 0.15 per unit of volatility. If you would invest  2,362  in Verallia on December 30, 2024 and sell it today you would earn a total of  532.00  from holding Verallia or generate 22.52% return on investment over 90 days.

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

Elior SCA  vs.  Verallia

Elior SCA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Elior SCA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Elior SCA is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Verallia

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Verallia are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Verallia sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Elior SCA and Verallia

The main advantage of trading using opposite Elior SCA and Verallia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elior SCA position performs unexpectedly, Verallia 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 Verallia will offset losses from the drop in Verallia's long position.

The idea behind Elior SCA and Verallia 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.