Correlation Between Veolia Environnement and MITSUBISHI KAKOKI

Can any of the company-specific risk be diversified away by investing in both Veolia Environnement and MITSUBISHI KAKOKI 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 MITSUBISHI KAKOKI 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 MITSUBISHI KAKOKI, you can compare the effects of market volatilities on Veolia Environnement and MITSUBISHI KAKOKI 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 MITSUBISHI KAKOKI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Veolia Environnement and MITSUBISHI KAKOKI.

Diversification Opportunities for Veolia Environnement and MITSUBISHI KAKOKI

0.55

Correlation Coefficient

Veolia Environnement  MITSUBISHI KAKOKI

Very weak diversification

The 3 months correlation between Veolia and MITSUBISHI is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Veolia Environnement SA and MITSUBISHI KAKOKI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MITSUBISHI KAKOKI 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 MITSUBISHI KAKOKI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MITSUBISHI KAKOKI has no effect on the direction of Veolia Environnement i.e., Veolia Environnement and MITSUBISHI KAKOKI go up and down completely randomly.

Pair Corralation between Veolia Environnement and MITSUBISHI KAKOKI

Assuming the 90 days trading horizon Veolia Environnement is expected to generate 2.87 times less return on investment than MITSUBISHI KAKOKI. But when comparing it to its historical volatility, Veolia Environnement SA is 1.14 times less risky than MITSUBISHI KAKOKI. It trades about 0.01 of its potential returns per unit of risk. MITSUBISHI KAKOKI is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,020  in MITSUBISHI KAKOKI on September 25, 2024 and sell it today you would earn a total of  180.00  from holding MITSUBISHI KAKOKI or generate 8.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

Veolia Environnement SA  vs.  MITSUBISHI KAKOKI

Veolia Environnement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Veolia Environnement SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

MITSUBISHI KAKOKI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MITSUBISHI KAKOKI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, MITSUBISHI KAKOKI is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Veolia Environnement and MITSUBISHI KAKOKI

The main advantage of trading using opposite Veolia Environnement and MITSUBISHI KAKOKI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Veolia Environnement position performs unexpectedly, MITSUBISHI KAKOKI 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 MITSUBISHI KAKOKI will offset losses from the drop in MITSUBISHI KAKOKI's long position.

The idea behind Veolia Environnement SA and MITSUBISHI KAKOKI 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.

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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.