Correlation Between Valneva SE and Centessa Pharmaceuticals

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

By analyzing existing cross correlation between Valneva SE ADR and Centessa Pharmaceuticals PLC, you can compare the effects of market volatilities on Valneva SE and Centessa Pharmaceuticals 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 Valneva SE with a short position of Centessa Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valneva SE and Centessa Pharmaceuticals.

Diversification Opportunities for Valneva SE and Centessa Pharmaceuticals

-0.73

Correlation Coefficient

Valneva SE  Centessa Pharmaceuticals

Pay attention - limited upside

The 3 months correlation between Valneva and Centessa is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Valneva SE ADR and Centessa Pharmaceuticals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centessa Pharmaceuticals and Valneva SE 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 Valneva SE ADR are associated (or correlated) with Centessa Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centessa Pharmaceuticals has no effect on the direction of Valneva SE i.e., Valneva SE and Centessa Pharmaceuticals go up and down completely randomly.

Pair Corralation between Valneva SE and Centessa Pharmaceuticals

Given the investment horizon of 90 days Valneva SE ADR is expected to under-perform the Centessa Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Valneva SE ADR is 1.21 times less risky than Centessa Pharmaceuticals. The stock trades about -0.27 of its potential returns per unit of risk. The Centessa Pharmaceuticals PLC is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,585  in Centessa Pharmaceuticals PLC on September 19, 2024 and sell it today you would earn a total of  90.00  from holding Centessa Pharmaceuticals PLC or generate 5.68% return on investment over 90 days.

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

Valneva SE ADR  vs.  Centessa Pharmaceuticals PLC

Valneva SE ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valneva SE ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Centessa Pharmaceuticals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Centessa Pharmaceuticals PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Centessa Pharmaceuticals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Valneva SE and Centessa Pharmaceuticals

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

The idea behind Valneva SE ADR and Centessa Pharmaceuticals 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..