Correlation Between Celanese and Valhi

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

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

Diversification Opportunities for Celanese and Valhi

0.82

Correlation Coefficient

Celanese  Valhi

Very poor diversification

The 3 months correlation between Celanese and Valhi is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Celanese and Valhi Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valhi Inc and Celanese 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 Celanese 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 Celanese i.e., Celanese and Valhi go up and down completely randomly.

Pair Corralation between Celanese and Valhi

Allowing for the 90-day total investment horizon Celanese is expected to generate 0.83 times more return on investment than Valhi. However, Celanese is 1.2 times less risky than Valhi. It trades about -0.04 of its potential returns per unit of risk. Valhi Inc is currently generating about -0.18 per unit of risk. If you would invest  7,220  in Celanese on November 19, 2024 and sell it today you would lose (414.00) from holding Celanese or give up 5.73% of portfolio value over 90 days.

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

Celanese  vs.  Valhi Inc

Celanese

Risk-Adjusted Performance

Very Weak

Over the last 90 days Celanese has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Celanese 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

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 March 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Celanese and Valhi

The main advantage of trading using opposite Celanese and Valhi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Celanese 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 Celanese 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.