Correlation Between Veolia Environnement and Neoen SA

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

Diversification Opportunities for Veolia Environnement and Neoen SA

-0.7

Correlation Coefficient

Veolia Environnement  Neoen SA

Excellent diversification

The 3 months correlation between Veolia and Neoen is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Veolia Environnement VE and Neoen SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neoen 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 Neoen SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neoen SA has no effect on the direction of Veolia Environnement i.e., Veolia Environnement and Neoen SA go up and down completely randomly.

Pair Corralation between Veolia Environnement and Neoen SA

Assuming the 90 days trading horizon Veolia Environnement VE is expected to generate 2.89 times more return on investment than Neoen SA. However, Veolia Environnement is 2.89 times more volatile than Neoen SA. It trades about 0.26 of its potential returns per unit of risk. Neoen SA is currently generating about -0.08 per unit of risk. If you would invest  2,684  in Veolia Environnement VE on December 30, 2024 and sell it today you would earn a total of  531.00  from holding Veolia Environnement VE or generate 19.78% return on investment over 90 days.

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

Veolia Environnement VE  vs.  Neoen SA

Veolia Environnement

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Veolia Environnement VE are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Veolia Environnement sustained solid returns over the last few months and may actually be approaching a breakup point.

Neoen SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Neoen SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Neoen SA 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 Neoen SA

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

The idea behind Veolia Environnement VE and Neoen 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.