Correlation Between Valneva SE and American Airlines

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

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

Diversification Opportunities for Valneva SE and American Airlines

-0.83

Correlation Coefficient

Valneva SE  American Airlines

Pay attention - limited upside

The 3 months correlation between Valneva and American is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Valneva SE ADR and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Valneva SE 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 Valneva SE ADR are associated (or correlated) with American Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Airlines has no effect on the direction of Valneva SE i.e., Valneva SE and American Airlines go up and down completely randomly.

Pair Corralation between Valneva SE and American Airlines

Given the investment horizon of 90 days Valneva SE is expected to generate 1.65 times less return on investment than American Airlines. In addition to that, Valneva SE is 1.28 times more volatile than American Airlines Group. It trades about 0.1 of its total potential returns per unit of risk. American Airlines Group is currently generating about 0.22 per unit of volatility. If you would invest  1,488  in American Airlines Group on October 5, 2024 and sell it today you would earn a total of  255.00  from holding American Airlines Group or generate 17.14% return on investment over 90 days.

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

Valneva SE ADR  vs.  American Airlines Group

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 weak performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

American Airlines

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Airlines Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, American Airlines disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Valneva SE and American Airlines

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

The idea behind Valneva SE ADR and American Airlines Group 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.