Correlation Between Basic Materials and Valero Energy
Can any of the company-specific risk be diversified away by investing in both Basic Materials 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 Basic Materials and Valero Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials and Valero Energy, you can compare the effects of market volatilities on Basic Materials 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 Basic Materials with a short position of Valero Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and Valero Energy.
Diversification Opportunities for Basic Materials and Valero Energy
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Basic and Valero is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials and Valero Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valero Energy and Basic Materials 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 Basic Materials 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 Basic Materials i.e., Basic Materials and Valero Energy go up and down completely randomly.
Pair Corralation between Basic Materials and Valero Energy
Assuming the 90 days trading horizon Basic Materials is expected to generate 3.08 times less return on investment than Valero Energy. In addition to that, Basic Materials is 1.1 times more volatile than Valero Energy. It trades about 0.12 of its total potential returns per unit of risk. Valero Energy is currently generating about 0.4 per unit of volatility. If you would invest 38,076 in Valero Energy on September 2, 2024 and sell it today you would earn a total of 2,924 from holding Valero Energy or generate 7.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Basic Materials vs. Valero Energy
Performance |
| Timeline |
Basic Materials and Valero Energy Volatility Contrast
Predicted Return Density |
| Returns |
Basic Materials
Pair trading matchups for Basic Materials
Valero Energy
Pair trading matchups for Valero Energy
Pair Trading with Basic Materials and Valero Energy
The main advantage of trading using opposite Basic Materials and Valero Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials 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.| Basic Materials vs. Uber Technologies | Basic Materials vs. Palantir Technologies | Basic Materials vs. Marvell Technology | Basic Materials vs. Align Technology |
| Valero Energy vs. Mitsubishi UFJ Financial | Valero Energy vs. Tyson Foods | Valero Energy vs. Sumitomo Mitsui Financial | Valero Energy vs. United Airlines Holdings |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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