Correlation Between Majic Wheels and Veolia Environnement

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

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

Diversification Opportunities for Majic Wheels and Veolia Environnement

-0.05

Correlation Coefficient

Majic Wheels  Veolia Environnement

Good diversification

The 3 months correlation between Majic and Veolia is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Majic Wheels 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 Majic Wheels 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 Majic Wheels 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 Majic Wheels i.e., Majic Wheels and Veolia Environnement go up and down completely randomly.

Pair Corralation between Majic Wheels and Veolia Environnement

Given the investment horizon of 90 days Majic Wheels Corp is expected to generate 81.83 times more return on investment than Veolia Environnement. However, Majic Wheels is 81.83 times more volatile than Veolia Environnement SA. It trades about 0.12 of its potential returns per unit of risk. Veolia Environnement SA is currently generating about 0.09 per unit of risk. If you would invest  0.01  in Majic Wheels Corp on December 4, 2024 and sell it today you would earn a total of  0.00  from holding Majic Wheels Corp or generate 0.0% return on investment over 90 days.

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

Majic Wheels Corp  vs.  Veolia Environnement SA

Majic Wheels Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Majic Wheels Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Majic Wheels disclosed solid returns over the last few months and may actually be approaching a breakup point.

Veolia Environnement

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Veolia Environnement SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, Veolia Environnement may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Majic Wheels and Veolia Environnement

The main advantage of trading using opposite Majic Wheels and Veolia Environnement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Majic Wheels 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 Majic Wheels 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.