Correlation Between Stericycle and Veolia Environnement

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

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

Diversification Opportunities for Stericycle and Veolia Environnement

-0.61

Correlation Coefficient

Stericycle  Veolia Environnement

Excellent diversification

The 3 months correlation between Stericycle and Veolia is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Stericycle and Veolia Environnement SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veolia Environnement and Stericycle 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 Stericycle 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 Stericycle i.e., Stericycle and Veolia Environnement go up and down completely randomly.

Pair Corralation between Stericycle and Veolia Environnement

Given the investment horizon of 90 days Stericycle is expected to generate 0.69 times more return on investment than Veolia Environnement. However, Stericycle is 1.45 times less risky than Veolia Environnement. It trades about 0.05 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  5,074  in Stericycle on September 21, 2024 and sell it today you would earn a total of  2,776  from holding Stericycle or generate 54.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	91.47%
Values	Daily Returns

Stericycle  vs.  Veolia Environnement SA

Stericycle

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Stericycle has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite inconsistent fundamental indicators, Stericycle disclosed solid returns over the last few months and may actually be approaching a breakup point.

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 Stericycle and Veolia Environnement

The main advantage of trading using opposite Stericycle and Veolia Environnement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stericycle 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 Stericycle 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.