Correlation Between Air France and Veolia Environnement
Can any of the company-specific risk be diversified away by investing in both Air France 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 Air France and Veolia Environnement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air France KLM SA and Veolia Environnement VE, you can compare the effects of market volatilities on Air France 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 Air France with a short position of Veolia Environnement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air France and Veolia Environnement.
Diversification Opportunities for Air France and Veolia Environnement
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Air and Veolia is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Air France KLM SA and Veolia Environnement VE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veolia Environnement and Air France 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 Air France KLM SA 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 Air France i.e., Air France and Veolia Environnement go up and down completely randomly.
Pair Corralation between Air France and Veolia Environnement
Assuming the 90 days horizon Air France KLM SA is expected to under-perform the Veolia Environnement. In addition to that, Air France is 1.91 times more volatile than Veolia Environnement VE. It trades about -0.03 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 2,255 in Veolia Environnement VE on August 29, 2024 and sell it today you would earn a total of 448.00 from holding Veolia Environnement VE or generate 19.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air France KLM SA vs. Veolia Environnement VE
Performance |
| Timeline |
| Air France KLM |
| Veolia Environnement |
Air France and Veolia Environnement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air France and Veolia Environnement
The main advantage of trading using opposite Air France and Veolia Environnement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air France 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.| Air France vs. Covivio Hotels | Air France vs. Invibes Advertising NV | Air France vs. Broadpeak SA | Air France vs. Union Technologies Informatique |
| Veolia Environnement vs. Vinci SA | Veolia Environnement vs. Compagnie de Saint Gobain | Veolia Environnement vs. Bouygues SA | Veolia Environnement vs. Engie SA |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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