Correlation Between Auto Trader and Veolia Environnement
Can any of the company-specific risk be diversified away by investing in both Auto Trader 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 Auto Trader and Veolia Environnement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Auto Trader Group and Veolia Environnement VE, you can compare the effects of market volatilities on Auto Trader 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 Auto Trader with a short position of Veolia Environnement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auto Trader and Veolia Environnement.
Diversification Opportunities for Auto Trader and Veolia Environnement
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Auto and Veolia is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader Group and Veolia Environnement VE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veolia Environnement and Auto Trader 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 Auto Trader Group 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 Auto Trader i.e., Auto Trader and Veolia Environnement go up and down completely randomly.
Pair Corralation between Auto Trader and Veolia Environnement
Assuming the 90 days trading horizon Auto Trader Group is expected to generate 0.82 times more return on investment than Veolia Environnement. However, Auto Trader Group is 1.21 times less risky than Veolia Environnement. It trades about 0.22 of its potential returns per unit of risk. Veolia Environnement VE is currently generating about -0.1 per unit of risk. If you would invest 78,940 in Auto Trader Group on September 12, 2024 and sell it today you would earn a total of 3,500 from holding Auto Trader Group or generate 4.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Auto Trader Group vs. Veolia Environnement VE
Performance |
| Timeline |
| Auto Trader Group |
| Veolia Environnement |
Auto Trader and Veolia Environnement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Auto Trader and Veolia Environnement
The main advantage of trading using opposite Auto Trader and Veolia Environnement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auto Trader 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.| Auto Trader vs. Catalyst Media Group | Auto Trader vs. CATLIN GROUP | Auto Trader vs. Tamburi Investment Partners | Auto Trader vs. Magnora ASA |
| Veolia Environnement vs. Solstad Offshore ASA | Veolia Environnement vs. Bisichi Mining PLC | Veolia Environnement vs. Fresenius Medical Care | Veolia Environnement vs. Creo Medical Group |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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