Correlation Between Vallourec and Atos SE
Can any of the company-specific risk be diversified away by investing in both Vallourec and Atos 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 Vallourec and Atos SE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vallourec and Atos SE, you can compare the effects of market volatilities on Vallourec and Atos 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 Vallourec with a short position of Atos SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vallourec and Atos SE.
Diversification Opportunities for Vallourec and Atos SE
Poor diversification
The 3 months correlation between Vallourec and Atos is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Vallourec and Atos SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atos SE 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 Atos SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atos SE has no effect on the direction of Vallourec i.e., Vallourec and Atos SE go up and down completely randomly.
Pair Corralation between Vallourec and Atos SE
Assuming the 90 days horizon Vallourec is expected to generate 49.44 times less return on investment than Atos SE. But when comparing it to its historical volatility, Vallourec is 84.79 times less risky than Atos SE. It trades about 0.33 of its potential returns per unit of risk. Atos SE is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 0.53 in Atos SE on August 24, 2024 and sell it today you would earn a total of 15.47 from holding Atos SE or generate 2918.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vallourec vs. Atos SE
Performance |
| Timeline |
| Vallourec |
| Atos SE |
Vallourec and Atos SE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vallourec and Atos SE
The main advantage of trading using opposite Vallourec and Atos SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vallourec position performs unexpectedly, Atos 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 Atos SE will offset losses from the drop in Atos SE's long position.The idea behind Vallourec and Atos SE 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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