Correlation Between Vallourec and Oeneo SA

Can any of the company-specific risk be diversified away by investing in both Vallourec and Oeneo SA 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 Vallourec and Oeneo SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vallourec and Oeneo SA, you can compare the effects of market volatilities on Vallourec and Oeneo SA 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 Vallourec with a short position of Oeneo SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vallourec and Oeneo SA.

Diversification Opportunities for Vallourec and Oeneo SA

-0.47

Correlation Coefficient

Vallourec  Oeneo SA

Very good diversification

The 3 months correlation between Vallourec and Oeneo is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Vallourec and Oeneo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oeneo SA and Vallourec 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 Vallourec are associated (or correlated) with Oeneo SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oeneo SA has no effect on the direction of Vallourec i.e., Vallourec and Oeneo SA go up and down completely randomly.

Pair Corralation between Vallourec and Oeneo SA

Assuming the 90 days horizon Vallourec is expected to generate 1.93 times more return on investment than Oeneo SA. However, Vallourec is 1.93 times more volatile than Oeneo SA. It trades about 0.2 of its potential returns per unit of risk. Oeneo SA is currently generating about -0.04 per unit of risk. If you would invest  1,405  in Vallourec on October 12, 2024 and sell it today you would earn a total of  376.00  from holding Vallourec or generate 26.76% return on investment over 90 days.

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

Vallourec  vs.  Oeneo SA

Vallourec

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vallourec are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Vallourec sustained solid returns over the last few months and may actually be approaching a breakup point.

Oeneo SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oeneo SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Oeneo SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vallourec and Oeneo SA

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

The idea behind Vallourec and Oeneo SA 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.