Correlation Between LiCycle Holdings and Veolia Environnement

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

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

Diversification Opportunities for LiCycle Holdings and Veolia Environnement

0.34

Correlation Coefficient

LiCycle Holdings  Veolia Environnement

Weak diversification

The 3 months correlation between LiCycle and Veolia is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding LiCycle Holdings Corp and Veolia Environnement SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veolia Environnement and LiCycle Holdings 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 LiCycle Holdings Corp 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 LiCycle Holdings i.e., LiCycle Holdings and Veolia Environnement go up and down completely randomly.

Pair Corralation between LiCycle Holdings and Veolia Environnement

Given the investment horizon of 90 days LiCycle Holdings Corp is expected to under-perform the Veolia Environnement. In addition to that, LiCycle Holdings is 5.78 times more volatile than Veolia Environnement SA. It trades about -0.11 of its total potential returns per unit of risk. Veolia Environnement SA is currently generating about -0.03 per unit of volatility. If you would invest  3,018  in Veolia Environnement SA on September 25, 2024 and sell it today you would lose (201.00) from holding Veolia Environnement SA or give up 6.66% of portfolio value over 90 days.

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

LiCycle Holdings Corp  vs.  Veolia Environnement SA

LiCycle Holdings Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LiCycle Holdings Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, LiCycle Holdings is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

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 fragile 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 LiCycle Holdings and Veolia Environnement

The main advantage of trading using opposite LiCycle Holdings and Veolia Environnement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LiCycle Holdings 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 LiCycle Holdings Corp 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.