Correlation Between Valneva SE and Universal Music

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

Diversification Opportunities for Valneva SE and Universal Music

0.45

Correlation Coefficient

Valneva SE  Universal Music

Very weak diversification

The 3 months correlation between Valneva and Universal is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Valneva SE ADR and Universal Music Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Music Group 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 Universal Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Music Group has no effect on the direction of Valneva SE i.e., Valneva SE and Universal Music go up and down completely randomly.

Pair Corralation between Valneva SE and Universal Music

Given the investment horizon of 90 days Valneva SE ADR is expected to under-perform the Universal Music. In addition to that, Valneva SE is 3.04 times more volatile than Universal Music Group. It trades about -0.07 of its total potential returns per unit of risk. Universal Music Group is currently generating about -0.02 per unit of volatility. If you would invest  1,279  in Universal Music Group on October 10, 2024 and sell it today you would lose (29.00) from holding Universal Music Group or give up 2.27% of portfolio value over 90 days.

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

Valneva SE ADR  vs.  Universal Music Group

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.

Universal Music Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universal Music Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Universal Music is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Valneva SE and Universal Music

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

The idea behind Valneva SE ADR and Universal Music Group 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.