Correlation Between Republic Services and Veolia Environnement

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

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

Diversification Opportunities for Republic Services and Veolia Environnement

0.47

Correlation Coefficient

Republic Services  Veolia Environnement

Very weak diversification

The 3 months correlation between Republic and Veolia is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Republic Services and Veolia Environnement SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veolia Environnement and Republic Services 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 Republic Services 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 Republic Services i.e., Republic Services and Veolia Environnement go up and down completely randomly.

Pair Corralation between Republic Services and Veolia Environnement

Assuming the 90 days horizon Republic Services is expected to generate 0.92 times more return on investment than Veolia Environnement. However, Republic Services is 1.09 times less risky than Veolia Environnement. It trades about 0.3 of its potential returns per unit of risk. Veolia Environnement SA is currently generating about 0.17 per unit of risk. If you would invest  20,950  in Republic Services on December 2, 2024 and sell it today you would earn a total of  1,550  from holding Republic Services or generate 7.4% return on investment over 90 days.

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

Republic Services  vs.  Veolia Environnement SA

Republic Services

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Republic Services are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Republic Services may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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. In spite of comparatively stable fundamental indicators, Veolia Environnement is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Republic Services and Veolia Environnement

The main advantage of trading using opposite Republic Services and Veolia Environnement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Republic Services 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 Republic Services 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.