Correlation Between Bayerische Motoren and Valero Energy
Can any of the company-specific risk be diversified away by investing in both Bayerische Motoren and Valero Energy 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 Bayerische Motoren and Valero Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bayerische Motoren Werke and Valero Energy, you can compare the effects of market volatilities on Bayerische Motoren and Valero Energy 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 Bayerische Motoren with a short position of Valero Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bayerische Motoren and Valero Energy.
Diversification Opportunities for Bayerische Motoren and Valero Energy
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Bayerische and Valero is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Bayerische Motoren Werke and Valero Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valero Energy and Bayerische Motoren 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 Bayerische Motoren Werke are associated (or correlated) with Valero Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valero Energy has no effect on the direction of Bayerische Motoren i.e., Bayerische Motoren and Valero Energy go up and down completely randomly.
Pair Corralation between Bayerische Motoren and Valero Energy
Assuming the 90 days trading horizon Bayerische Motoren Werke is expected to under-perform the Valero Energy. But the stock apears to be less risky and, when comparing its historical volatility, Bayerische Motoren Werke is 1.45 times less risky than Valero Energy. The stock trades about -0.01 of its potential returns per unit of risk. The Valero Energy is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 203,734 in Valero Energy on September 14, 2024 and sell it today you would earn a total of 69,935 from holding Valero Energy or generate 34.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bayerische Motoren Werke vs. Valero Energy
Performance |
| Timeline |
| Bayerische Motoren Werke |
| Valero Energy |
Bayerische Motoren and Valero Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bayerische Motoren and Valero Energy
The main advantage of trading using opposite Bayerische Motoren and Valero Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bayerische Motoren position performs unexpectedly, Valero Energy 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 Valero Energy will offset losses from the drop in Valero Energy's long position.| Bayerische Motoren vs. Verizon Communications | Bayerische Motoren vs. United Airlines Holdings | Bayerische Motoren vs. First Republic Bank | Bayerische Motoren vs. McEwen Mining |
| Valero Energy vs. The Walt Disney | Valero Energy vs. The Goodyear Tire | Valero Energy vs. Cognizant Technology Solutions | Valero Energy vs. Netflix |
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.
Other Complementary Tools
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges |