Correlation Between Sprott Focus and Veolia Environnement

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

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

Diversification Opportunities for Sprott Focus and Veolia Environnement

-0.23

Correlation Coefficient

Sprott Focus  Veolia Environnement

Very good diversification

The 3 months correlation between Sprott and Veolia is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Focus Trust and Veolia Environnement SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veolia Environnement and Sprott Focus 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 Sprott Focus Trust 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 Sprott Focus i.e., Sprott Focus and Veolia Environnement go up and down completely randomly.

Pair Corralation between Sprott Focus and Veolia Environnement

Given the investment horizon of 90 days Sprott Focus is expected to generate 6.64 times less return on investment than Veolia Environnement. But when comparing it to its historical volatility, Sprott Focus Trust is 1.89 times less risky than Veolia Environnement. It trades about 0.06 of its potential returns per unit of risk. Veolia Environnement SA is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,790  in Veolia Environnement SA on December 26, 2024 and sell it today you would earn a total of  609.00  from holding Veolia Environnement SA or generate 21.83% return on investment over 90 days.

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

Sprott Focus Trust  vs.  Veolia Environnement SA

Sprott Focus Trust

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Focus Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Sprott Focus is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Veolia Environnement

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Veolia Environnement SA are ranked lower than 16 (%) 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 Sprott Focus and Veolia Environnement

The main advantage of trading using opposite Sprott Focus and Veolia Environnement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sprott Focus 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 Sprott Focus Trust 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.

Check out your portfolio center.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.