Correlation Between Associated British and Veolia Environnement
Can any of the company-specific risk be diversified away by investing in both Associated British 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 Associated British and Veolia Environnement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated British Foods and Veolia Environnement VE, you can compare the effects of market volatilities on Associated British 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 Associated British with a short position of Veolia Environnement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and Veolia Environnement.
Diversification Opportunities for Associated British and Veolia Environnement
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Associated and Veolia is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and Veolia Environnement VE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veolia Environnement and Associated British 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 Associated British Foods 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 Associated British i.e., Associated British and Veolia Environnement go up and down completely randomly.
Pair Corralation between Associated British and Veolia Environnement
Assuming the 90 days trading horizon Associated British Foods is expected to under-perform the Veolia Environnement. In addition to that, Associated British is 1.18 times more volatile than Veolia Environnement VE. It trades about -0.04 of its total potential returns per unit of risk. Veolia Environnement VE is currently generating about 0.04 per unit of volatility. If you would invest 2,783 in Veolia Environnement VE on December 7, 2024 and sell it today you would earn a total of 268.00 from holding Veolia Environnement VE or generate 9.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Associated British Foods vs. Veolia Environnement VE
Performance |
| Timeline |
| Associated British Foods |
| Veolia Environnement |
Associated British and Veolia Environnement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Associated British and Veolia Environnement
The main advantage of trading using opposite Associated British and Veolia Environnement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British 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.| Associated British vs. Silvercorp Metals | ||
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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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