Correlation Between Veolia Environnement and 3i Group

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Can any of the company-specific risk be diversified away by investing in both Veolia Environnement and 3i Group 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 Veolia Environnement and 3i Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Veolia Environnement SA and 3i Group Plc, you can compare the effects of market volatilities on Veolia Environnement and 3i Group 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 Veolia Environnement with a short position of 3i Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Veolia Environnement and 3i Group.

Diversification Opportunities for Veolia Environnement and 3i Group

0.34
  Correlation Coefficient

Weak diversification

The 3 months correlation between Veolia and TGOPF is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Veolia Environnement SA and 3i Group Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3i Group Plc and Veolia Environnement 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 Veolia Environnement SA are associated (or correlated) with 3i Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3i Group Plc has no effect on the direction of Veolia Environnement i.e., Veolia Environnement and 3i Group go up and down completely randomly.

Pair Corralation between Veolia Environnement and 3i Group

Assuming the 90 days horizon Veolia Environnement is expected to generate 4.2 times less return on investment than 3i Group. But when comparing it to its historical volatility, Veolia Environnement SA is 1.63 times less risky than 3i Group. It trades about 0.03 of its potential returns per unit of risk. 3i Group Plc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,596  in 3i Group Plc on December 30, 2023 and sell it today you would earn a total of  2,017  from holding 3i Group Plc or generate 126.38% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy98.58%
ValuesDaily Returns

Veolia Environnement SA  vs.  3i Group Plc

 Performance 
       Timeline  
Veolia Environnement 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Veolia Environnement SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Veolia Environnement is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
3i Group Plc 

Risk-Adjusted Performance

10 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in 3i Group Plc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, 3i Group reported solid returns over the last few months and may actually be approaching a breakup point.

Veolia Environnement and 3i Group Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Veolia Environnement and 3i Group

The main advantage of trading using opposite Veolia Environnement and 3i Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Veolia Environnement position performs unexpectedly, 3i Group 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 3i Group will offset losses from the drop in 3i Group's long position.
The idea behind Veolia Environnement SA and 3i Group Plc 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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