Correlation Between Veolia Environnement and Lisi SA

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

Diversification Opportunities for Veolia Environnement and Lisi SA

0.69

Correlation Coefficient

Veolia Environnement  Lisi SA

Poor diversification

The 3 months correlation between Veolia and Lisi is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Veolia Environnement VE and Lisi SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lisi SA 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 Lisi SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lisi SA has no effect on the direction of Veolia Environnement i.e., Veolia Environnement and Lisi SA go up and down completely randomly.

Pair Corralation between Veolia Environnement and Lisi SA

Assuming the 90 days trading horizon Veolia Environnement VE is expected to under-perform the Lisi SA. But the stock apears to be less risky and, when comparing its historical volatility, Veolia Environnement VE is 1.55 times less risky than Lisi SA. The stock trades about -0.03 of its potential returns per unit of risk. The Lisi SA is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,130  in Lisi SA on October 5, 2024 and sell it today you would earn a total of  70.00  from holding Lisi SA or generate 3.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

Veolia Environnement VE  vs.  Lisi 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.

Lisi SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lisi 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 forward 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 Lisi SA

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

The idea behind Veolia Environnement VE and Lisi 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.