Correlation Between Sage Therapeutic and Valneva SE

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

Diversification Opportunities for Sage Therapeutic and Valneva SE

0.7
  Correlation Coefficient

Poor diversification

The 3 months correlation between Sage and Valneva is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Sage Therapeutic 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 Sage Therapeutic 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 Sage Therapeutic 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 Sage Therapeutic i.e., Sage Therapeutic and Valneva SE go up and down completely randomly.

Pair Corralation between Sage Therapeutic and Valneva SE

Given the investment horizon of 90 days Sage Therapeutic is expected to under-perform the Valneva SE. In addition to that, Sage Therapeutic is 1.22 times more volatile than Valneva SE ADR. It trades about -0.05 of its total potential returns per unit of risk. Valneva SE ADR is currently generating about -0.03 per unit of volatility. If you would invest  1,368  in Valneva SE ADR on August 8, 2024 and sell it today you would lose (790.00) from holding Valneva SE ADR or give up 57.75% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Sage Therapeutic  vs.  Valneva SE ADR

 Performance 
       Timeline  
Sage Therapeutic 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Sage Therapeutic 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
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 weak performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Sage Therapeutic and Valneva SE Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sage Therapeutic and Valneva SE

The main advantage of trading using opposite Sage Therapeutic and Valneva SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sage Therapeutic 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 Sage Therapeutic 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

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