Correlation Between Veolia Environnement and Air France

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

By analyzing existing cross correlation between Veolia Environnement VE and Air France KLM SA, you can compare the effects of market volatilities on Veolia Environnement and Air France 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 Air France. Check out your portfolio center. Please also check ongoing floating volatility patterns of Veolia Environnement and Air France.

Diversification Opportunities for Veolia Environnement and Air France

0.73

Correlation Coefficient

Veolia Environnement  Air France

Poor diversification

The 3 months correlation between Veolia and Air is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Veolia Environnement VE and Air France KLM SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air France KLM 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 VE are associated (or correlated) with Air France. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air France KLM has no effect on the direction of Veolia Environnement i.e., Veolia Environnement and Air France go up and down completely randomly.

Pair Corralation between Veolia Environnement and Air France

Assuming the 90 days trading horizon Veolia Environnement VE is expected to generate 0.4 times more return on investment than Air France. However, Veolia Environnement VE is 2.48 times less risky than Air France. It trades about -0.18 of its potential returns per unit of risk. Air France KLM SA is currently generating about -0.1 per unit of risk. If you would invest  2,985  in Veolia Environnement VE on October 15, 2024 and sell it today you would lose (338.00) from holding Veolia Environnement VE or give up 11.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Veolia Environnement VE  vs.  Air France KLM SA

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.

Air France KLM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air France KLM SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Veolia Environnement and Air France

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

The idea behind Veolia Environnement VE and Air France KLM 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.