Correlation Between AIR PRODCHEMICALS and Valero Energy

Can any of the company-specific risk be diversified away by investing in both AIR PRODCHEMICALS 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 AIR PRODCHEMICALS and Valero Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AIR PRODCHEMICALS and Valero Energy Corp, you can compare the effects of market volatilities on AIR PRODCHEMICALS 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 AIR PRODCHEMICALS with a short position of Valero Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIR PRODCHEMICALS and Valero Energy.

Diversification Opportunities for AIR PRODCHEMICALS and Valero Energy

0.73

Correlation Coefficient

AIR PRODCHEMICALS  Valero Energy

Poor diversification

The 3 months correlation between AIR and Valero is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding AIR PRODCHEMICALS and Valero Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valero Energy Corp and AIR PRODCHEMICALS 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 AIR PRODCHEMICALS 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 Corp has no effect on the direction of AIR PRODCHEMICALS i.e., AIR PRODCHEMICALS and Valero Energy go up and down completely randomly.

Pair Corralation between AIR PRODCHEMICALS and Valero Energy

Assuming the 90 days trading horizon AIR PRODCHEMICALS is expected to under-perform the Valero Energy. But the stock apears to be less risky and, when comparing its historical volatility, AIR PRODCHEMICALS is 1.37 times less risky than Valero Energy. The stock trades about -0.05 of its potential returns per unit of risk. The Valero Energy Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  11,298  in Valero Energy Corp on December 20, 2024 and sell it today you would earn a total of  760.00  from holding Valero Energy Corp or generate 6.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

AIR PRODCHEMICALS  vs.  Valero Energy Corp

AIR PRODCHEMICALS

Risk-Adjusted Performance

Very Weak

Over the last 90 days AIR PRODCHEMICALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AIR PRODCHEMICALS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Valero Energy Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Valero Energy Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Valero Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with AIR PRODCHEMICALS and Valero Energy

The main advantage of trading using opposite AIR PRODCHEMICALS and Valero Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AIR PRODCHEMICALS 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.

The idea behind AIR PRODCHEMICALS and Valero Energy Corp 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..