Correlation Between Veolia Environnement and Umicore SA

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

Diversification Opportunities for Veolia Environnement and Umicore SA

0.68

Correlation Coefficient

Veolia Environnement  Umicore SA

Poor diversification

The 3 months correlation between Veolia and Umicore is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Veolia Environnement SA and Umicore SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Umicore 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 SA are associated (or correlated) with Umicore SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Umicore SA has no effect on the direction of Veolia Environnement i.e., Veolia Environnement and Umicore SA go up and down completely randomly.

Pair Corralation between Veolia Environnement and Umicore SA

Assuming the 90 days trading horizon Veolia Environnement SA is expected to generate 0.97 times more return on investment than Umicore SA. However, Veolia Environnement SA is 1.03 times less risky than Umicore SA. It trades about -0.01 of its potential returns per unit of risk. Umicore SA is currently generating about -0.25 per unit of risk. If you would invest  1,370  in Veolia Environnement SA on October 13, 2024 and sell it today you would lose (10.00) from holding Veolia Environnement SA or give up 0.73% 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.  Umicore SA

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 fragile performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Umicore SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Umicore SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking indicators, Umicore SA 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 Umicore SA

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

The idea behind Veolia Environnement SA and Umicore 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.