Correlation Between MSCI ACWI and Valeo SE

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

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

Diversification Opportunities for MSCI ACWI and Valeo SE

-0.82

Correlation Coefficient

MSCI ACWI  Valeo SE

Pay attention - limited upside

The 3 months correlation between MSCI and Valeo is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding MSCI ACWI exAUCONSUMER and Valeo SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valeo SE and MSCI ACWI 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 MSCI ACWI exAUCONSUMER are associated (or correlated) with Valeo SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valeo SE has no effect on the direction of MSCI ACWI i.e., MSCI ACWI and Valeo SE go up and down completely randomly.

Pair Corralation between MSCI ACWI and Valeo SE

Assuming the 90 days horizon MSCI ACWI exAUCONSUMER is expected to under-perform the Valeo SE. But the stock apears to be less risky and, when comparing its historical volatility, MSCI ACWI exAUCONSUMER is 16.87 times less risky than Valeo SE. The stock trades about -0.03 of its potential returns per unit of risk. The Valeo SE is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  797.00  in Valeo SE on September 22, 2024 and sell it today you would earn a total of  106.00  from holding Valeo SE or generate 13.3% return on investment over 90 days.

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

MSCI ACWI exAUCONSUMER  vs.  Valeo SE

MSCI ACWI exAUCONSUMER

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MSCI ACWI exAUCONSUMER are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, MSCI ACWI is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Valeo SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valeo SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with MSCI ACWI and Valeo SE

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

The idea behind MSCI ACWI exAUCONSUMER and Valeo 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.