Correlation Between Vallourec and Getlink SE

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

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

Diversification Opportunities for Vallourec and Getlink SE

-0.72

Correlation Coefficient

Vallourec  Getlink SE

Pay attention - limited upside

The 3 months correlation between Vallourec and Getlink is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Vallourec and Getlink SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Getlink SE 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 Getlink SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Getlink SE has no effect on the direction of Vallourec i.e., Vallourec and Getlink SE go up and down completely randomly.

Pair Corralation between Vallourec and Getlink SE

Assuming the 90 days horizon Vallourec is expected to generate 2.45 times more return on investment than Getlink SE. However, Vallourec is 2.45 times more volatile than Getlink SE. It trades about 0.12 of its potential returns per unit of risk. Getlink SE is currently generating about -0.12 per unit of risk. If you would invest  1,407  in Vallourec on September 3, 2024 and sell it today you would earn a total of  232.00  from holding Vallourec or generate 16.49% return on investment over 90 days.

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

Vallourec  vs.  Getlink SE

Vallourec

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vallourec are ranked lower than 9 (%) 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.

Getlink SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Getlink SE 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 Getlink SE

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

The idea behind Vallourec and Getlink SE 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.