Correlation Between Dassault Systemes and Vallourec
Can any of the company-specific risk be diversified away by investing in both Dassault Systemes and Vallourec 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 Dassault Systemes and Vallourec into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dassault Systemes SE and Vallourec, you can compare the effects of market volatilities on Dassault Systemes and Vallourec 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 Dassault Systemes with a short position of Vallourec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dassault Systemes and Vallourec.
Diversification Opportunities for Dassault Systemes and Vallourec
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dassault and Vallourec is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Dassault Systemes SE and Vallourec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vallourec and Dassault Systemes 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 Dassault Systemes SE are associated (or correlated) with Vallourec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vallourec has no effect on the direction of Dassault Systemes i.e., Dassault Systemes and Vallourec go up and down completely randomly.
Pair Corralation between Dassault Systemes and Vallourec
Assuming the 90 days trading horizon Dassault Systemes is expected to generate 2.21 times less return on investment than Vallourec. But when comparing it to its historical volatility, Dassault Systemes SE is 1.36 times less risky than Vallourec. It trades about 0.14 of its potential returns per unit of risk. Vallourec is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 1,412 in Vallourec on October 26, 2024 and sell it today you would earn a total of 449.00 from holding Vallourec or generate 31.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dassault Systemes SE vs. Vallourec
Performance |
| Timeline |
| Dassault Systemes |
| Vallourec |
Dassault Systemes and Vallourec Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dassault Systemes and Vallourec
The main advantage of trading using opposite Dassault Systemes and Vallourec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dassault Systemes position performs unexpectedly, Vallourec 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 Vallourec will offset losses from the drop in Vallourec's long position.| Dassault Systemes vs. Thales SA | Dassault Systemes vs. Safran SA | Dassault Systemes vs. Air Liquide SA | Dassault Systemes vs. Capgemini SE |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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