Correlation Between Vallourec and DBV Technologies

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

By analyzing existing cross correlation between Vallourec and DBV Technologies SA, you can compare the effects of market volatilities on Vallourec and DBV Technologies 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 DBV Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vallourec and DBV Technologies.

Diversification Opportunities for Vallourec and DBV Technologies

-0.64

Correlation Coefficient

Vallourec  DBV Technologies

Excellent diversification

The 3 months correlation between Vallourec and DBV is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Vallourec and DBV Technologies SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DBV Technologies 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 DBV Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DBV Technologies has no effect on the direction of Vallourec i.e., Vallourec and DBV Technologies go up and down completely randomly.

Pair Corralation between Vallourec and DBV Technologies

Assuming the 90 days horizon Vallourec is expected to generate 1.11 times more return on investment than DBV Technologies. However, Vallourec is 1.11 times more volatile than DBV Technologies SA. It trades about 0.19 of its potential returns per unit of risk. DBV Technologies SA is currently generating about -0.18 per unit of risk. If you would invest  1,397  in Vallourec on January 29, 2024 and sell it today you would earn a total of  221.00  from holding Vallourec or generate 15.82% return on investment over 90 days.

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

Vallourec  vs.  DBV Technologies SA

Vallourec

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vallourec are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Vallourec sustained solid returns over the last few months and may actually be approaching a breakup point.

DBV Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DBV Technologies SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Vallourec and DBV Technologies

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

The idea behind Vallourec and DBV Technologies SA 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.