Correlation Between CARSALESCOM and Veolia Environnement

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

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

Diversification Opportunities for CARSALESCOM and Veolia Environnement

-0.09

Correlation Coefficient

CARSALESCOM  Veolia Environnement

Good diversification

The 3 months correlation between CARSALESCOM and Veolia is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding CARSALESCOM and Veolia Environnement SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veolia Environnement and CARSALESCOM 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 CARSALESCOM are associated (or correlated) with Veolia Environnement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veolia Environnement has no effect on the direction of CARSALESCOM i.e., CARSALESCOM and Veolia Environnement go up and down completely randomly.

Pair Corralation between CARSALESCOM and Veolia Environnement

Assuming the 90 days trading horizon CARSALESCOM is expected to generate 1.18 times more return on investment than Veolia Environnement. However, CARSALESCOM is 1.18 times more volatile than Veolia Environnement SA. It trades about 0.09 of its potential returns per unit of risk. Veolia Environnement SA is currently generating about 0.02 per unit of risk. If you would invest  1,605  in CARSALESCOM on October 21, 2024 and sell it today you would earn a total of  695.00  from holding CARSALESCOM or generate 43.3% return on investment over 90 days.

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

CARSALESCOM  vs.  Veolia Environnement SA

CARSALESCOM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CARSALESCOM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, CARSALESCOM is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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 basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with CARSALESCOM and Veolia Environnement

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

The idea behind CARSALESCOM and Veolia Environnement 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.

Check out your portfolio center.

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.