Correlation Between Valero Energy and Trane Technologies
Can any of the company-specific risk be diversified away by investing in both Valero Energy and Trane 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 Valero Energy and Trane Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Valero Energy and Trane Technologies plc, you can compare the effects of market volatilities on Valero Energy and Trane 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 Valero Energy with a short position of Trane Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valero Energy and Trane Technologies.
Diversification Opportunities for Valero Energy and Trane Technologies
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Valero and Trane is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Valero Energy and Trane Technologies plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trane Technologies plc and Valero Energy 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 Valero Energy are associated (or correlated) with Trane Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trane Technologies plc has no effect on the direction of Valero Energy i.e., Valero Energy and Trane Technologies go up and down completely randomly.
Pair Corralation between Valero Energy and Trane Technologies
Assuming the 90 days trading horizon Valero Energy is expected to generate 0.95 times more return on investment than Trane Technologies. However, Valero Energy is 1.05 times less risky than Trane Technologies. It trades about 0.15 of its potential returns per unit of risk. Trane Technologies plc is currently generating about -0.14 per unit of risk. If you would invest 37,927 in Valero Energy on November 4, 2024 and sell it today you would earn a total of 2,073 from holding Valero Energy or generate 5.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 90.48% |
| Values | Daily Returns |
Valero Energy vs. Trane Technologies plc
Performance |
| Timeline |
| Valero Energy |
| Trane Technologies plc |
Valero Energy and Trane Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Valero Energy and Trane Technologies
The main advantage of trading using opposite Valero Energy and Trane Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valero Energy position performs unexpectedly, Trane 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 Trane Technologies will offset losses from the drop in Trane Technologies' long position.| Valero Energy vs. Nordon Indstrias Metalrgicas | Valero Energy vs. CVS Health | Valero Energy vs. Metalurgica Gerdau SA | Valero Energy vs. Multilaser Industrial SA |
| Trane Technologies vs. Live Nation Entertainment, | Trane Technologies vs. LPL Financial Holdings | Trane Technologies vs. Fidelity National Information | Trane Technologies vs. Ameriprise Financial |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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