Correlation Between Veolia Environnement and Aqua Metals

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

By analyzing existing cross correlation between Veolia Environnement SA and Aqua Metals, you can compare the effects of market volatilities on Veolia Environnement and Aqua Metals 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 Aqua Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Veolia Environnement and Aqua Metals.

Diversification Opportunities for Veolia Environnement and Aqua Metals

0.69

Correlation Coefficient

Veolia Environnement  Aqua Metals

Poor diversification

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

Pair Corralation between Veolia Environnement and Aqua Metals

Assuming the 90 days horizon Veolia Environnement SA is expected to generate 0.19 times more return on investment than Aqua Metals. However, Veolia Environnement SA is 5.29 times less risky than Aqua Metals. It trades about -0.08 of its potential returns per unit of risk. Aqua Metals is currently generating about -0.04 per unit of risk. If you would invest  2,910  in Veolia Environnement SA on October 6, 2024 and sell it today you would lose (186.00) from holding Veolia Environnement SA or give up 6.39% of portfolio value over 90 days.

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

Veolia Environnement SA  vs.  Aqua Metals

Veolia Environnement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Veolia Environnement SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Aqua Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aqua Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Veolia Environnement and Aqua Metals

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

The idea behind Veolia Environnement SA and Aqua Metals 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.