Correlation Between Veolia Environnement and Orange SA

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

Diversification Opportunities for Veolia Environnement and Orange SA

0.86

Correlation Coefficient

Veolia Environnement  Orange SA

Very poor diversification

The 3 months correlation between Veolia and Orange is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Veolia Environnement VE and Orange SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orange 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 Orange SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orange SA has no effect on the direction of Veolia Environnement i.e., Veolia Environnement and Orange SA go up and down completely randomly.

Pair Corralation between Veolia Environnement and Orange SA

Assuming the 90 days trading horizon Veolia Environnement is expected to generate 1.14 times less return on investment than Orange SA. In addition to that, Veolia Environnement is 1.43 times more volatile than Orange SA. It trades about 0.26 of its total potential returns per unit of risk. Orange SA is currently generating about 0.43 per unit of volatility. If you would invest  963.00  in Orange SA on December 30, 2024 and sell it today you would earn a total of  222.00  from holding Orange SA or generate 23.05% return on investment over 90 days.

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

Veolia Environnement VE  vs.  Orange 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.

Orange SA

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Orange SA are ranked lower than 33 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Orange SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Veolia Environnement and Orange SA

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

The idea behind Veolia Environnement VE and Orange 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.