Correlation Between SGS SA and Valens

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

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

Diversification Opportunities for SGS SA and Valens

0.45

Correlation Coefficient

SGS SA  Valens

Very weak diversification

The 3 months correlation between SGS and Valens is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding SGS SA and Valens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valens and SGS 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 SGS SA are associated (or correlated) with Valens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valens has no effect on the direction of SGS SA i.e., SGS SA and Valens go up and down completely randomly.

Pair Corralation between SGS SA and Valens

Assuming the 90 days horizon SGS SA is expected to under-perform the Valens. But the pink sheet apears to be less risky and, when comparing its historical volatility, SGS SA is 3.63 times less risky than Valens. The pink sheet trades about -0.22 of its potential returns per unit of risk. The Valens is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  178.00  in Valens on September 4, 2024 and sell it today you would earn a total of  48.00  from holding Valens or generate 26.97% return on investment over 90 days.

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

SGS SA  vs.  Valens

SGS SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SGS SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating 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.

Valens

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Valens are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile essential indicators, Valens displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SGS SA and Valens

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

The idea behind SGS SA and Valens 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.