Correlation Between Verallia and Elior SCA

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

By analyzing existing cross correlation between Verallia and Elior SCA, you can compare the effects of market volatilities on Verallia and Elior SCA 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 Verallia with a short position of Elior SCA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verallia and Elior SCA.

Diversification Opportunities for Verallia and Elior SCA

0.37

Correlation Coefficient

Verallia  Elior SCA

Weak diversification

The 3 months correlation between Verallia and Elior is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Verallia and Elior SCA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elior SCA and Verallia 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 Verallia are associated (or correlated) with Elior SCA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elior SCA has no effect on the direction of Verallia i.e., Verallia and Elior SCA go up and down completely randomly.

Pair Corralation between Verallia and Elior SCA

Assuming the 90 days trading horizon Verallia is expected to generate 0.91 times more return on investment than Elior SCA. However, Verallia is 1.09 times less risky than Elior SCA. It trades about 0.15 of its potential returns per unit of risk. Elior SCA is currently generating about -0.04 per unit of risk. If you would invest  2,362  in Verallia on December 29, 2024 and sell it today you would earn a total of  532.00  from holding Verallia or generate 22.52% return on investment over 90 days.

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

Verallia  vs.  Elior SCA

Verallia

Risk-Adjusted Performance

Good

Over the last 90 days Verallia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak basic indicators, Verallia sustained solid returns over the last few months and may actually be approaching a breakup point.

Elior SCA

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Verallia and Elior SCA

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

The idea behind Verallia and Elior SCA 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.