Correlation Between Valneva SE and ESGL Holdings

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

Diversification Opportunities for Valneva SE and ESGL Holdings

-0.56

Correlation Coefficient

Valneva SE  ESGL Holdings

Excellent diversification

The 3 months correlation between Valneva and ESGL is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Valneva SE ADR and ESGL Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESGL Holdings Limited 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 ESGL Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESGL Holdings Limited has no effect on the direction of Valneva SE i.e., Valneva SE and ESGL Holdings go up and down completely randomly.

Pair Corralation between Valneva SE and ESGL Holdings

Given the investment horizon of 90 days Valneva SE ADR is expected to under-perform the ESGL Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Valneva SE ADR is 5.85 times less risky than ESGL Holdings. The stock trades about -0.34 of its potential returns per unit of risk. The ESGL Holdings Limited is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1.00  in ESGL Holdings Limited on September 5, 2024 and sell it today you would earn a total of  0.80  from holding ESGL Holdings Limited or generate 80.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	70.31%
Values	Daily Returns

Valneva SE ADR  vs.  ESGL Holdings Limited

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

ESGL Holdings Limited

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ESGL Holdings Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating essential indicators, ESGL Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Valneva SE and ESGL Holdings

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

The idea behind Valneva SE ADR and ESGL Holdings Limited 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.