Correlation Between NORTHROP and Valneva SE

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Can any of the company-specific risk be diversified away by investing in both NORTHROP and Valneva SE 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 NORTHROP and Valneva SE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NORTHROP GRUMMAN P and Valneva SE ADR, you can compare the effects of market volatilities on NORTHROP and Valneva SE 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 NORTHROP with a short position of Valneva SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of NORTHROP and Valneva SE.

Diversification Opportunities for NORTHROP and Valneva SE

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between NORTHROP and Valneva is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding NORTHROP GRUMMAN P and Valneva SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valneva SE ADR and NORTHROP 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 NORTHROP GRUMMAN P are associated (or correlated) with Valneva SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valneva SE ADR has no effect on the direction of NORTHROP i.e., NORTHROP and Valneva SE go up and down completely randomly.

Pair Corralation between NORTHROP and Valneva SE

Assuming the 90 days trading horizon NORTHROP GRUMMAN P is expected to generate 0.22 times more return on investment than Valneva SE. However, NORTHROP GRUMMAN P is 4.61 times less risky than Valneva SE. It trades about 0.0 of its potential returns per unit of risk. Valneva SE ADR is currently generating about -0.18 per unit of risk. If you would invest  9,451  in NORTHROP GRUMMAN P on September 3, 2024 and sell it today you would lose (33.00) from holding NORTHROP GRUMMAN P or give up 0.35% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy98.4%
ValuesDaily Returns

NORTHROP GRUMMAN P  vs.  Valneva SE ADR

 Performance 
       Timeline  
NORTHROP GRUMMAN P 

Risk-Adjusted Performance

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

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

NORTHROP and Valneva SE Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NORTHROP and Valneva SE

The main advantage of trading using opposite NORTHROP and Valneva SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NORTHROP position performs unexpectedly, Valneva SE 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 Valneva SE will offset losses from the drop in Valneva SE's long position.
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The idea behind NORTHROP GRUMMAN P and Valneva SE ADR 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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