Correlation Between Ford and Veolia Environnement

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

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

Diversification Opportunities for Ford and Veolia Environnement

0.36

Correlation Coefficient

Ford  Veolia Environnement

Weak diversification

The 3 months correlation between Ford and Veolia is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Veolia Environnement SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veolia Environnement and Ford 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 Ford Motor 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 Ford i.e., Ford and Veolia Environnement go up and down completely randomly.

Pair Corralation between Ford and Veolia Environnement

Taking into account the 90-day investment horizon Ford is expected to generate 2.22 times less return on investment than Veolia Environnement. In addition to that, Ford is 1.22 times more volatile than Veolia Environnement SA. It trades about 0.06 of its total potential returns per unit of risk. Veolia Environnement SA is currently generating about 0.16 per unit of volatility. If you would invest  2,829  in Veolia Environnement SA on December 20, 2024 and sell it today you would earn a total of  459.00  from holding Veolia Environnement SA or generate 16.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Ford Motor  vs.  Veolia Environnement SA

Ford Motor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Ford may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Veolia Environnement

Risk-Adjusted Performance

Good

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

Pair Trading with Ford and Veolia Environnement

The main advantage of trading using opposite Ford and Veolia Environnement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.