Correlation Between Veolia Environnement and China BlueChemical

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

Diversification Opportunities for Veolia Environnement and China BlueChemical

-0.65

Correlation Coefficient

Veolia Environnement  China BlueChemical

Excellent diversification

The 3 months correlation between Veolia and China is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Veolia Environnement SA and China BlueChemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China BlueChemical 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 China BlueChemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China BlueChemical has no effect on the direction of Veolia Environnement i.e., Veolia Environnement and China BlueChemical go up and down completely randomly.

Pair Corralation between Veolia Environnement and China BlueChemical

Assuming the 90 days horizon Veolia Environnement SA is expected to generate 0.4 times more return on investment than China BlueChemical. However, Veolia Environnement SA is 2.5 times less risky than China BlueChemical. It trades about 0.21 of its potential returns per unit of risk. China BlueChemical is currently generating about 0.02 per unit of risk. If you would invest  2,694  in Veolia Environnement SA on December 26, 2024 and sell it today you would earn a total of  465.00  from holding Veolia Environnement SA or generate 17.26% return on investment over 90 days.

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

Veolia Environnement SA  vs.  China BlueChemical

Veolia Environnement

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Veolia Environnement SA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Veolia Environnement reported solid returns over the last few months and may actually be approaching a breakup point.

China BlueChemical

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China BlueChemical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, China BlueChemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Veolia Environnement and China BlueChemical

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

The idea behind Veolia Environnement SA and China BlueChemical 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.