Correlation Between PACCAR and Valneva SE

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

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

Diversification Opportunities for PACCAR and Valneva SE

-0.88

Correlation Coefficient

PACCAR  Valneva SE

Pay attention - limited upside

The 3 months correlation between PACCAR and Valneva is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding PACCAR Inc and Valneva SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valneva SE ADR and PACCAR 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 PACCAR Inc are associated (or correlated) with Valneva SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valneva SE ADR has no effect on the direction of PACCAR i.e., PACCAR and Valneva SE go up and down completely randomly.

Pair Corralation between PACCAR and Valneva SE

Given the investment horizon of 90 days PACCAR Inc is expected to generate 0.36 times more return on investment than Valneva SE. However, PACCAR Inc is 2.77 times less risky than Valneva SE. It trades about -0.02 of its potential returns per unit of risk. Valneva SE ADR is currently generating about -0.24 per unit of risk. If you would invest  11,613  in PACCAR Inc on September 12, 2024 and sell it today you would lose (76.00) from holding PACCAR Inc or give up 0.65% of portfolio value over 90 days.

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

PACCAR Inc  vs.  Valneva SE ADR

PACCAR Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PACCAR Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, PACCAR reported solid returns over the last few months and may actually be approaching a breakup point.

Valneva SE ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valneva SE ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with PACCAR and Valneva SE

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

The idea behind PACCAR Inc and Valneva SE ADR 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.