Correlation Between Globalfoundries and Valens

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

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

Diversification Opportunities for Globalfoundries and Valens

0.07

Correlation Coefficient

Globalfoundries  Valens

Significant diversification

The 3 months correlation between Globalfoundries and Valens is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Globalfoundries and Valens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valens and Globalfoundries 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 Globalfoundries 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 Globalfoundries i.e., Globalfoundries and Valens go up and down completely randomly.

Pair Corralation between Globalfoundries and Valens

Considering the 90-day investment horizon Globalfoundries is expected to generate 0.71 times more return on investment than Valens. However, Globalfoundries is 1.42 times less risky than Valens. It trades about 0.0 of its potential returns per unit of risk. Valens is currently generating about -0.03 per unit of risk. If you would invest  5,363  in Globalfoundries on September 14, 2024 and sell it today you would lose (965.00) from holding Globalfoundries or give up 17.99% of portfolio value over 90 days.

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

Globalfoundries  vs.  Valens

Globalfoundries

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Globalfoundries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Globalfoundries unveiled solid returns over the last few months and may actually be approaching a breakup point.

Valens

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Valens are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, Valens may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Globalfoundries and Valens

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

The idea behind Globalfoundries and Valens 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.