Correlation Between Neoen SA and Voltalia

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

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

Diversification Opportunities for Neoen SA and Voltalia

0.28

Correlation Coefficient

Neoen SA  Voltalia

Modest diversification

The 3 months correlation between Neoen and Voltalia is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Neoen SA and Voltalia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voltalia SA and Neoen SA 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 Neoen SA are associated (or correlated) with Voltalia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voltalia SA has no effect on the direction of Neoen SA i.e., Neoen SA and Voltalia go up and down completely randomly.

Pair Corralation between Neoen SA and Voltalia

Assuming the 90 days trading horizon Neoen SA is expected to generate 7.48 times less return on investment than Voltalia. But when comparing it to its historical volatility, Neoen SA is 16.64 times less risky than Voltalia. It trades about 0.11 of its potential returns per unit of risk. Voltalia SA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  768.00  in Voltalia SA on November 29, 2024 and sell it today you would earn a total of  46.00  from holding Voltalia SA or generate 5.99% return on investment over 90 days.

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

Neoen SA  vs.  Voltalia SA

Neoen SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Neoen SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Neoen SA is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Voltalia SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Voltalia SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Voltalia may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Neoen SA and Voltalia

The main advantage of trading using opposite Neoen SA and Voltalia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Neoen SA position performs unexpectedly, Voltalia 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 Voltalia will offset losses from the drop in Voltalia's long position.

The idea behind Neoen SA and Voltalia 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.