Correlation Between Valneva SE and Azul SA

Can any of the company-specific risk be diversified away by investing in both Valneva SE and Azul SA 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 Azul SA 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 Azul SA, you can compare the effects of market volatilities on Valneva SE and Azul SA 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 Azul SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valneva SE and Azul SA.

Diversification Opportunities for Valneva SE and Azul SA

0.85

Correlation Coefficient

Valneva SE  Azul SA

Very poor diversification

The 3 months correlation between Valneva and Azul is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Valneva SE ADR and Azul SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azul SA 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 Azul SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azul SA has no effect on the direction of Valneva SE i.e., Valneva SE and Azul SA go up and down completely randomly.

Pair Corralation between Valneva SE and Azul SA

Given the investment horizon of 90 days Valneva SE ADR is expected to generate 0.97 times more return on investment than Azul SA. However, Valneva SE ADR is 1.03 times less risky than Azul SA. It trades about 0.1 of its potential returns per unit of risk. Azul SA is currently generating about -0.22 per unit of risk. If you would invest  403.00  in Valneva SE ADR on October 5, 2024 and sell it today you would earn a total of  34.00  from holding Valneva SE ADR or generate 8.44% return on investment over 90 days.

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

Valneva SE ADR  vs.  Azul SA

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.

Azul SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Azul SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Valneva SE and Azul SA

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

The idea behind Valneva SE ADR and Azul SA 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.