Correlation Between Veolia Environnement and Tomra Systems

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

Diversification Opportunities for Veolia Environnement and Tomra Systems

0.6

Correlation Coefficient

Veolia Environnement  Tomra Systems

Poor diversification

The 3 months correlation between Veolia and Tomra is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Veolia Environnement SA and Tomra Systems ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tomra Systems ASA 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 Tomra Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tomra Systems ASA has no effect on the direction of Veolia Environnement i.e., Veolia Environnement and Tomra Systems go up and down completely randomly.

Pair Corralation between Veolia Environnement and Tomra Systems

Assuming the 90 days horizon Veolia Environnement SA is expected to under-perform the Tomra Systems. But the pink sheet apears to be less risky and, when comparing its historical volatility, Veolia Environnement SA is 2.03 times less risky than Tomra Systems. The pink sheet trades about -0.14 of its potential returns per unit of risk. The Tomra Systems ASA is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,497  in Tomra Systems ASA on September 13, 2024 and sell it today you would lose (160.00) from holding Tomra Systems ASA or give up 10.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Veolia Environnement SA  vs.  Tomra Systems ASA

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 latest unfluctuating 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.

Tomra Systems ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tomra Systems ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic 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 Veolia Environnement and Tomra Systems

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

The idea behind Veolia Environnement SA and Tomra Systems ASA 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.