Correlation Between Valneva SE and Lexicon Pharmaceuticals

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

Diversification Opportunities for Valneva SE and Lexicon Pharmaceuticals

0.91

Correlation Coefficient

Valneva SE  Lexicon Pharmaceuticals

Almost no diversification

The 3 months correlation between Valneva and Lexicon is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Valneva SE ADR and Lexicon Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lexicon Pharmaceuticals 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 Lexicon Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lexicon Pharmaceuticals has no effect on the direction of Valneva SE i.e., Valneva SE and Lexicon Pharmaceuticals go up and down completely randomly.

Pair Corralation between Valneva SE and Lexicon Pharmaceuticals

Given the investment horizon of 90 days Valneva SE ADR is expected to generate 0.65 times more return on investment than Lexicon Pharmaceuticals. However, Valneva SE ADR is 1.54 times less risky than Lexicon Pharmaceuticals. It trades about -0.08 of its potential returns per unit of risk. Lexicon Pharmaceuticals is currently generating about -0.12 per unit of risk. If you would invest  559.00  in Valneva SE ADR on October 7, 2024 and sell it today you would lose (96.00) from holding Valneva SE ADR or give up 17.17% of portfolio value over 90 days.

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

Valneva SE ADR  vs.  Lexicon Pharmaceuticals

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.

Lexicon Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lexicon Pharmaceuticals 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 basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Valneva SE and Lexicon Pharmaceuticals

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

The idea behind Valneva SE ADR and Lexicon Pharmaceuticals 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.