Correlation Between Vallourec and Crossject

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

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

Diversification Opportunities for Vallourec and Crossject

-0.84

Correlation Coefficient

Vallourec  Crossject

Pay attention - limited upside

The 3 months correlation between Vallourec and Crossject is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Vallourec and Crossject in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crossject and Vallourec 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 Vallourec are associated (or correlated) with Crossject. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crossject has no effect on the direction of Vallourec i.e., Vallourec and Crossject go up and down completely randomly.

Pair Corralation between Vallourec and Crossject

Assuming the 90 days horizon Vallourec is expected to generate 2.02 times less return on investment than Crossject. But when comparing it to its historical volatility, Vallourec is 1.75 times less risky than Crossject. It trades about 0.05 of its potential returns per unit of risk. Crossject is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  166.00  in Crossject on September 24, 2024 and sell it today you would earn a total of  32.00  from holding Crossject or generate 19.28% return on investment over 90 days.

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

Vallourec  vs.  Crossject

Vallourec

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vallourec are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Vallourec sustained solid returns over the last few months and may actually be approaching a breakup point.

Crossject

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crossject has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Vallourec and Crossject

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

The idea behind Vallourec and Crossject 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.