Correlation Between Valneva SE and Novartis

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

Diversification Opportunities for Valneva SE and Novartis

0.53

Correlation Coefficient

Valneva SE  Novartis

Very weak diversification

The 3 months correlation between Valneva and Novartis is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Valneva SE ADR and Novartis AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novartis AG ADR 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 Novartis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novartis AG ADR has no effect on the direction of Valneva SE i.e., Valneva SE and Novartis go up and down completely randomly.

Pair Corralation between Valneva SE and Novartis

Given the investment horizon of 90 days Valneva SE ADR is expected to generate 3.91 times more return on investment than Novartis. However, Valneva SE is 3.91 times more volatile than Novartis AG ADR. It trades about 0.19 of its potential returns per unit of risk. Novartis AG ADR is currently generating about 0.23 per unit of risk. If you would invest  432.00  in Valneva SE ADR on December 29, 2024 and sell it today you would earn a total of  293.00  from holding Valneva SE ADR or generate 67.82% return on investment over 90 days.

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

Valneva SE ADR  vs.  Novartis AG ADR

Valneva SE ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Valneva SE ADR are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain essential indicators, Valneva SE displayed solid returns over the last few months and may actually be approaching a breakup point.

Novartis AG ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Novartis AG ADR are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Novartis unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Valneva SE and Novartis

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

The idea behind Valneva SE ADR and Novartis AG ADR 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.