Correlation Between United States and Valens
Can any of the company-specific risk be diversified away by investing in both United States and Valens 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 United States and Valens into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Steel and Valens, you can compare the effects of market volatilities on United States and Valens 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 United States with a short position of Valens. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Valens.
Diversification Opportunities for United States and Valens
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between United and Valens is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Valens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valens and United States 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 United States Steel are associated (or correlated) with Valens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valens has no effect on the direction of United States i.e., United States and Valens go up and down completely randomly.
Pair Corralation between United States and Valens
Taking into account the 90-day investment horizon United States Steel is expected to generate 0.99 times more return on investment than Valens. However, United States Steel is 1.01 times less risky than Valens. It trades about 0.07 of its potential returns per unit of risk. Valens is currently generating about 0.0 per unit of risk. If you would invest 2,217 in United States Steel on September 1, 2024 and sell it today you would earn a total of 1,860 from holding United States Steel or generate 83.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United States Steel vs. Valens
Performance |
| Timeline |
| United States Steel |
| Valens |
United States and Valens Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and Valens
The main advantage of trading using opposite United States and Valens positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States position performs unexpectedly, Valens 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 Valens will offset losses from the drop in Valens' long position.| United States vs. Nucor Corp | United States vs. Steel Dynamics | United States vs. ArcelorMittal SA ADR | United States vs. Gerdau SA ADR |
| Valens vs. Wolfspeed | Valens vs. GSI Technology | Valens vs. Lattice Semiconductor | Valens vs. ON Semiconductor |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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