Correlation Between Imerys SA and Vallourec

Can any of the company-specific risk be diversified away by investing in both Imerys SA and Vallourec 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 Imerys SA and Vallourec into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Imerys SA and Vallourec, you can compare the effects of market volatilities on Imerys SA and Vallourec 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 Imerys SA with a short position of Vallourec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Imerys SA and Vallourec.

Diversification Opportunities for Imerys SA and Vallourec

0.25

Correlation Coefficient

Imerys SA  Vallourec

Modest diversification

The 3 months correlation between Imerys and Vallourec is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Imerys SA and Vallourec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vallourec and Imerys SA 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 Imerys SA are associated (or correlated) with Vallourec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vallourec has no effect on the direction of Imerys SA i.e., Imerys SA and Vallourec go up and down completely randomly.

Pair Corralation between Imerys SA and Vallourec

Assuming the 90 days horizon Imerys SA is expected to under-perform the Vallourec. But the stock apears to be less risky and, when comparing its historical volatility, Imerys SA is 1.09 times less risky than Vallourec. The stock trades about -0.05 of its potential returns per unit of risk. The Vallourec is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,359  in Vallourec on August 30, 2024 and sell it today you would earn a total of  265.00  from holding Vallourec or generate 19.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Imerys SA  vs.  Vallourec

Imerys SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Imerys SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Imerys SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vallourec

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vallourec are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Vallourec may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Imerys SA and Vallourec

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

The idea behind Imerys SA and Vallourec 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.