Correlation Between TotalEnergies and Veolia Environnement

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

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

Diversification Opportunities for TotalEnergies and Veolia Environnement

0.75

Correlation Coefficient

TotalEnergies  Veolia Environnement

Poor diversification

The 3 months correlation between TotalEnergies and Veolia is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding TotalEnergies SE and Veolia Environnement VE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veolia Environnement and TotalEnergies 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 TotalEnergies SE 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 TotalEnergies i.e., TotalEnergies and Veolia Environnement go up and down completely randomly.

Pair Corralation between TotalEnergies and Veolia Environnement

Assuming the 90 days trading horizon TotalEnergies SE is expected to under-perform the Veolia Environnement. In addition to that, TotalEnergies is 1.32 times more volatile than Veolia Environnement VE. It trades about -0.12 of its total potential returns per unit of risk. Veolia Environnement VE is currently generating about -0.12 per unit of volatility. If you would invest  2,984  in Veolia Environnement VE on August 31, 2024 and sell it today you would lose (229.00) from holding Veolia Environnement VE or give up 7.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

TotalEnergies SE  vs.  Veolia Environnement VE

TotalEnergies SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TotalEnergies SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Veolia Environnement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Veolia Environnement VE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with TotalEnergies and Veolia Environnement

The main advantage of trading using opposite TotalEnergies and Veolia Environnement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TotalEnergies 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 TotalEnergies SE and Veolia Environnement VE 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.