Correlation Between Alphabet and Valneva SE

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

By analyzing existing cross correlation between Alphabet Inc Class A and Valneva SE ADR, you can compare the effects of market volatilities on Alphabet 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 Alphabet with a short position of Valneva SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Valneva SE.

Diversification Opportunities for Alphabet and Valneva SE

0.55

Correlation Coefficient

Alphabet  Valneva SE

Very weak diversification

The 3 months correlation between Alphabet and Valneva is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class A 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 Alphabet 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 Alphabet Inc Class A 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 Alphabet i.e., Alphabet and Valneva SE go up and down completely randomly.

Pair Corralation between Alphabet and Valneva SE

Assuming the 90 days horizon Alphabet is expected to generate 1.67 times less return on investment than Valneva SE. But when comparing it to its historical volatility, Alphabet Inc Class A is 3.07 times less risky than Valneva SE. It trades about 0.17 of its potential returns per unit of risk. Valneva SE ADR is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  710.00  in Valneva SE ADR on January 20, 2024 and sell it today you would earn a total of  48.00  from holding Valneva SE ADR or generate 6.76% return on investment over 90 days.

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

Alphabet Inc Class A  vs.  Valneva SE ADR

Alphabet Class A

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class A are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating technical and fundamental indicators, Alphabet may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Valneva SE ADR

Risk-Adjusted Performance

0 of 100

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 very healthy essential indicators, Valneva SE is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Alphabet and Valneva SE

The main advantage of trading using opposite Alphabet and Valneva SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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.

The idea behind Alphabet Inc Class A 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.