Correlation Between American Vanguard and Valhi

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

By analyzing existing cross correlation between American Vanguard and Valhi Inc, you can compare the effects of market volatilities on American Vanguard and Valhi 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 American Vanguard with a short position of Valhi. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Vanguard and Valhi.

Diversification Opportunities for American Vanguard and Valhi

0.2

Correlation Coefficient

American Vanguard  Valhi

Modest diversification

The 3 months correlation between American and Valhi is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding American Vanguard and Valhi Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valhi Inc and American Vanguard 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 American Vanguard are associated (or correlated) with Valhi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valhi Inc has no effect on the direction of American Vanguard i.e., American Vanguard and Valhi go up and down completely randomly.

Pair Corralation between American Vanguard and Valhi

Considering the 90-day investment horizon American Vanguard is expected to under-perform the Valhi. But the stock apears to be less risky and, when comparing its historical volatility, American Vanguard is 1.02 times less risky than Valhi. The stock trades about -0.07 of its potential returns per unit of risk. The Valhi Inc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,328  in Valhi Inc on October 11, 2024 and sell it today you would lose (147.00) from holding Valhi Inc or give up 6.31% of portfolio value over 90 days.

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

American Vanguard  vs.  Valhi Inc

American Vanguard

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Vanguard has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, American Vanguard is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Valhi Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valhi Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with American Vanguard and Valhi

The main advantage of trading using opposite American Vanguard and Valhi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Vanguard position performs unexpectedly, Valhi 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 Valhi will offset losses from the drop in Valhi's long position.

The idea behind American Vanguard and Valhi Inc 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 Transaction History module to view history of all your transactions and understand their impact on performance.