Correlation Between Valeo SA and Lagardere SCA

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

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

Diversification Opportunities for Valeo SA and Lagardere SCA

0.48

Correlation Coefficient

Valeo SA  Lagardere SCA

Very weak diversification

The 3 months correlation between Valeo and Lagardere is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Valeo SA and Lagardere SCA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lagardere SCA and Valeo SA 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 Valeo SA are associated (or correlated) with Lagardere SCA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lagardere SCA has no effect on the direction of Valeo SA i.e., Valeo SA and Lagardere SCA go up and down completely randomly.

Pair Corralation between Valeo SA and Lagardere SCA

Assuming the 90 days horizon Valeo SA is expected to generate 2.15 times more return on investment than Lagardere SCA. However, Valeo SA is 2.15 times more volatile than Lagardere SCA. It trades about 0.07 of its potential returns per unit of risk. Lagardere SCA is currently generating about 0.03 per unit of risk. If you would invest  888.00  in Valeo SA on December 22, 2024 and sell it today you would earn a total of  97.00  from holding Valeo SA or generate 10.92% return on investment over 90 days.

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

Valeo SA  vs.  Lagardere SCA

Valeo SA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Valeo SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Valeo SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Lagardere SCA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lagardere SCA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Lagardere SCA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Valeo SA and Lagardere SCA

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

The idea behind Valeo SA and Lagardere SCA 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.