Correlation Between Vallourec and Safe Orthopaedics

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

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

Diversification Opportunities for Vallourec and Safe Orthopaedics

-0.92

Correlation Coefficient

Vallourec  Safe Orthopaedics

Pay attention - limited upside

The 3 months correlation between Vallourec and Safe is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding Vallourec and Safe Orthopaedics SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safe Orthopaedics 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 Safe Orthopaedics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safe Orthopaedics has no effect on the direction of Vallourec i.e., Vallourec and Safe Orthopaedics go up and down completely randomly.

Pair Corralation between Vallourec and Safe Orthopaedics

Assuming the 90 days horizon Vallourec is expected to generate 0.15 times more return on investment than Safe Orthopaedics. However, Vallourec is 6.67 times less risky than Safe Orthopaedics. It trades about -0.06 of its potential returns per unit of risk. Safe Orthopaedics SA is currently generating about -0.23 per unit of risk. If you would invest  1,663  in Vallourec on September 24, 2024 and sell it today you would lose (36.00) from holding Vallourec or give up 2.16% of portfolio value over 90 days.

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

Vallourec  vs.  Safe Orthopaedics SA

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.

Safe Orthopaedics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Safe Orthopaedics SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Vallourec and Safe Orthopaedics

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

The idea behind Vallourec and Safe Orthopaedics SA 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.