Correlation Between Dassault Systemes and Vallourec

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

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

Diversification Opportunities for Dassault Systemes and Vallourec

-0.25

Correlation Coefficient

Dassault Systemes  Vallourec

Very good diversification

The 3 months correlation between Dassault and Vallourec is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Dassault Systemes SE and Vallourec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vallourec and Dassault Systemes 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 Dassault Systemes SE 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 Dassault Systemes i.e., Dassault Systemes and Vallourec go up and down completely randomly.

Pair Corralation between Dassault Systemes and Vallourec

Assuming the 90 days trading horizon Dassault Systemes SE is expected to under-perform the Vallourec. But the stock apears to be less risky and, when comparing its historical volatility, Dassault Systemes SE is 1.34 times less risky than Vallourec. The stock trades about -0.06 of its potential returns per unit of risk. The Vallourec is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,359  in Vallourec on September 28, 2024 and sell it today you would earn a total of  276.00  from holding Vallourec or generate 20.31% return on investment over 90 days.

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

Dassault Systemes SE  vs.  Vallourec

Dassault Systemes

Risk-Adjusted Performance

0 of 100

Very Weak

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

Vallourec

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vallourec are ranked lower than 12 (%) 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.

Pair Trading with Dassault Systemes and Vallourec

The main advantage of trading using opposite Dassault Systemes and Vallourec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dassault Systemes 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 Dassault Systemes SE 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.