Correlation Between Ford and Veolia Environnement
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Veolia Environnement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Veolia Environnement SA, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Veolia Environnement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Veolia Environnement.
Diversification Opportunities for Ford and Veolia Environnement
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Veolia is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Veolia Environnement SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veolia Environnement and Ford 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 Ford Motor 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 Ford i.e., Ford and Veolia Environnement go up and down completely randomly.
Pair Corralation between Ford and Veolia Environnement
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.21 times more return on investment than Veolia Environnement. However, Ford is 1.21 times more volatile than Veolia Environnement SA. It trades about -0.01 of its potential returns per unit of risk. Veolia Environnement SA is currently generating about -0.08 per unit of risk. If you would invest 1,033 in Ford Motor on October 30, 2024 and sell it today you would lose (25.00) from holding Ford Motor or give up 2.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Veolia Environnement SA
Performance |
| Timeline |
| Ford Motor |
| Veolia Environnement |
Ford and Veolia Environnement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Veolia Environnement
The main advantage of trading using opposite Ford and Veolia Environnement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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.| Veolia Environnement vs. CHINA SOUTHN AIR H | Veolia Environnement vs. Alaska Air Group | Veolia Environnement vs. Altair Engineering | Veolia Environnement vs. NORWEGIAN AIR SHUT |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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