Correlation Between Valneva SE and Emergent Biosolutions

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

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

Diversification Opportunities for Valneva SE and Emergent Biosolutions

0.5

Correlation Coefficient

Valneva SE  Emergent Biosolutions

Very weak diversification

The 3 months correlation between Valneva and Emergent is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Valneva SE ADR and Emergent Biosolutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emergent Biosolutions 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 ADR are associated (or correlated) with Emergent Biosolutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emergent Biosolutions has no effect on the direction of Valneva SE i.e., Valneva SE and Emergent Biosolutions go up and down completely randomly.

Pair Corralation between Valneva SE and Emergent Biosolutions

Given the investment horizon of 90 days Valneva SE is expected to generate 9.84 times less return on investment than Emergent Biosolutions. But when comparing it to its historical volatility, Valneva SE ADR is 2.94 times less risky than Emergent Biosolutions. It trades about 0.05 of its potential returns per unit of risk. Emergent Biosolutions is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  245.00  in Emergent Biosolutions on March 15, 2024 and sell it today you would earn a total of  387.00  from holding Emergent Biosolutions or generate 157.96% return on investment over 90 days.

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

Valneva SE ADR  vs.  Emergent Biosolutions

Valneva SE ADR

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Valneva SE ADR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain essential indicators, Valneva SE displayed solid returns over the last few months and may actually be approaching a breakup point.

Emergent Biosolutions

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Emergent Biosolutions are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, Emergent Biosolutions unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Valneva SE and Emergent Biosolutions

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

The idea behind Valneva SE ADR and Emergent Biosolutions 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.