Correlation Between Veolia Environnement and Entech SE

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

Diversification Opportunities for Veolia Environnement and Entech SE

0.35

Correlation Coefficient

Veolia Environnement  Entech SE

Weak diversification

The 3 months correlation between Veolia and Entech is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Veolia Environnement VE and Entech SE SAS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entech SE SAS 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 Entech SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entech SE SAS has no effect on the direction of Veolia Environnement i.e., Veolia Environnement and Entech SE go up and down completely randomly.

Pair Corralation between Veolia Environnement and Entech SE

Assuming the 90 days trading horizon Veolia Environnement VE is expected to generate 0.33 times more return on investment than Entech SE. However, Veolia Environnement VE is 3.0 times less risky than Entech SE. It trades about -0.25 of its potential returns per unit of risk. Entech SE SAS is currently generating about -0.13 per unit of risk. If you would invest  2,803  in Veolia Environnement VE on October 12, 2024 and sell it today you would lose (107.00) from holding Veolia Environnement VE or give up 3.82% of portfolio value over 90 days.

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

Veolia Environnement VE  vs.  Entech SE SAS

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.

Entech SE SAS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Entech SE SAS has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Entech SE is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Veolia Environnement and Entech SE

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

The idea behind Veolia Environnement VE and Entech SE SAS 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.