Correlation Between Valneva SE and Discover Financial

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

Diversification Opportunities for Valneva SE and Discover Financial

-0.79

Correlation Coefficient

Valneva SE  Discover Financial

Pay attention - limited upside

The 3 months correlation between Valneva and Discover is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Valneva SE ADR and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial 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 Discover Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Discover Financial has no effect on the direction of Valneva SE i.e., Valneva SE and Discover Financial go up and down completely randomly.

Pair Corralation between Valneva SE and Discover Financial

Given the investment horizon of 90 days Valneva SE ADR is expected to under-perform the Discover Financial. In addition to that, Valneva SE is 1.21 times more volatile than Discover Financial Services. It trades about -0.11 of its total potential returns per unit of risk. Discover Financial Services is currently generating about 0.14 per unit of volatility. If you would invest  14,588  in Discover Financial Services on October 20, 2024 and sell it today you would earn a total of  4,130  from holding Discover Financial Services or generate 28.31% return on investment over 90 days.

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

Valneva SE ADR  vs.  Discover Financial Services

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 February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Discover Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Discover Financial Services are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Discover Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Valneva SE and Discover Financial

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

The idea behind Valneva SE ADR and Discover Financial Services 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.