Correlation Between Veolia Environnement and Casella Waste

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

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

Diversification Opportunities for Veolia Environnement and Casella Waste

-0.85

Correlation Coefficient

Veolia Environnement  Casella Waste

Pay attention - limited upside

The 3 months correlation between Veolia and Casella is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Veolia Environnement SA and Casella Waste Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Casella Waste Systems and Veolia Environnement 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 Veolia Environnement SA are associated (or correlated) with Casella Waste. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Casella Waste Systems has no effect on the direction of Veolia Environnement i.e., Veolia Environnement and Casella Waste go up and down completely randomly.

Pair Corralation between Veolia Environnement and Casella Waste

Assuming the 90 days horizon Veolia Environnement SA is expected to generate 2.31 times more return on investment than Casella Waste. However, Veolia Environnement is 2.31 times more volatile than Casella Waste Systems. It trades about 0.03 of its potential returns per unit of risk. Casella Waste Systems is currently generating about 0.05 per unit of risk. If you would invest  2,358  in Veolia Environnement SA on September 21, 2024 and sell it today you would earn a total of  406.00  from holding Veolia Environnement SA or generate 17.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	86.67%
Values	Daily Returns

Veolia Environnement SA  vs.  Casella Waste Systems

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.

Casella Waste Systems

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Casella Waste Systems are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Casella Waste is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Veolia Environnement and Casella Waste

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

The idea behind Veolia Environnement SA and Casella Waste Systems 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.