Correlation Between Valneva SE and United Therapeutics

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

Diversification Opportunities for Valneva SE and United Therapeutics

-0.36

Correlation Coefficient

Valneva SE  United Therapeutics

Very good diversification

The 3 months correlation between Valneva and United is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Valneva SE ADR and United Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Therapeutics 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 United Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Therapeutics has no effect on the direction of Valneva SE i.e., Valneva SE and United Therapeutics go up and down completely randomly.

Pair Corralation between Valneva SE and United Therapeutics

Given the investment horizon of 90 days Valneva SE ADR is expected to under-perform the United Therapeutics. In addition to that, Valneva SE is 2.24 times more volatile than United Therapeutics. It trades about -0.01 of its total potential returns per unit of risk. United Therapeutics is currently generating about 0.05 per unit of volatility. If you would invest  22,472  in United Therapeutics on December 2, 2024 and sell it today you would earn a total of  9,533  from holding United Therapeutics or generate 42.42% return on investment over 90 days.

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

Valneva SE ADR  vs.  United Therapeutics

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.

United Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Valneva SE and United Therapeutics

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

The idea behind Valneva SE ADR and United Therapeutics 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.

Check out your portfolio center.

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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.