Correlation Between Veolia Environnement and OriginClear

Can any of the company-specific risk be diversified away by investing in both Veolia Environnement and OriginClear 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 OriginClear 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 OriginClear, you can compare the effects of market volatilities on Veolia Environnement and OriginClear 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 OriginClear. Check out your portfolio center. Please also check ongoing floating volatility patterns of Veolia Environnement and OriginClear.

Diversification Opportunities for Veolia Environnement and OriginClear

0.85

Correlation Coefficient

Veolia Environnement  OriginClear

Very poor diversification

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

Pair Corralation between Veolia Environnement and OriginClear

Assuming the 90 days horizon Veolia Environnement SA is expected to under-perform the OriginClear. But the pink sheet apears to be less risky and, when comparing its historical volatility, Veolia Environnement SA is 8.18 times less risky than OriginClear. The pink sheet trades about -0.17 of its potential returns per unit of risk. The OriginClear is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  0.60  in OriginClear on September 15, 2024 and sell it today you would lose (0.18) from holding OriginClear or give up 30.0% of portfolio value over 90 days.

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

Veolia Environnement SA  vs.  OriginClear

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. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

OriginClear

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OriginClear has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, OriginClear is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Veolia Environnement and OriginClear

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

The idea behind Veolia Environnement SA and OriginClear 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.