Correlation Between Valneva SE and Erste Group

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

By analyzing existing cross correlation between Valneva SE and Erste Group Bank, you can compare the effects of market volatilities on Valneva SE and Erste Group 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 Erste Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valneva SE and Erste Group.

Diversification Opportunities for Valneva SE and Erste Group

0.82

Correlation Coefficient

Valneva SE  Erste Group

Very poor diversification

The 3 months correlation between Valneva and Erste is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Valneva SE and Erste Group Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erste Group Bank 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 are associated (or correlated) with Erste Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erste Group Bank has no effect on the direction of Valneva SE i.e., Valneva SE and Erste Group go up and down completely randomly.

Pair Corralation between Valneva SE and Erste Group

Assuming the 90 days trading horizon Valneva SE is expected to generate 2.41 times more return on investment than Erste Group. However, Valneva SE is 2.41 times more volatile than Erste Group Bank. It trades about 0.15 of its potential returns per unit of risk. Erste Group Bank is currently generating about 0.07 per unit of risk. If you would invest  210.00  in Valneva SE on December 29, 2024 and sell it today you would earn a total of  115.00  from holding Valneva SE or generate 54.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Valneva SE  vs.  Erste Group Bank

Valneva SE

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Valneva SE are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Valneva SE demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Erste Group Bank

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Erste Group Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Erste Group may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Valneva SE and Erste Group

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

The idea behind Valneva SE and Erste Group Bank 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.