Correlation Between Enviri and Veolia Environnement

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

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

Diversification Opportunities for Enviri and Veolia Environnement

-0.85

Correlation Coefficient

Enviri  Veolia Environnement

Pay attention - limited upside

The 3 months correlation between Enviri and Veolia is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Enviri and Veolia Environnement SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veolia Environnement and Enviri 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 Enviri 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 Enviri i.e., Enviri and Veolia Environnement go up and down completely randomly.

Pair Corralation between Enviri and Veolia Environnement

Considering the 90-day investment horizon Enviri is expected to generate 1.07 times more return on investment than Veolia Environnement. However, Enviri is 1.07 times more volatile than Veolia Environnement SA. It trades about 0.1 of its potential returns per unit of risk. Veolia Environnement SA is currently generating about 0.03 per unit of risk. If you would invest  638.00  in Enviri on September 21, 2024 and sell it today you would earn a total of  277.00  from holding Enviri or generate 43.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	27.04%
Values	Daily Returns

Enviri  vs.  Veolia Environnement SA

Enviri

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enviri has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Enviri is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Veolia Environnement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Veolia Environnement SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Enviri and Veolia Environnement

The main advantage of trading using opposite Enviri and Veolia Environnement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enviri 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 Enviri 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.