Correlation Between Global Ship and Valhi

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

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

Diversification Opportunities for Global Ship and Valhi

-0.13

Correlation Coefficient

Global Ship  Valhi

Good diversification

The 3 months correlation between Global and Valhi is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Global Ship Lease and Valhi Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valhi Inc and Global Ship 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 Global Ship Lease 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 Global Ship i.e., Global Ship and Valhi go up and down completely randomly.

Pair Corralation between Global Ship and Valhi

Assuming the 90 days trading horizon Global Ship is expected to generate 8.54 times less return on investment than Valhi. But when comparing it to its historical volatility, Global Ship Lease is 4.43 times less risky than Valhi. It trades about 0.04 of its potential returns per unit of risk. Valhi Inc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,307  in Valhi Inc on October 2, 2024 and sell it today you would earn a total of  950.00  from holding Valhi Inc or generate 72.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.56%
Values	Daily Returns

Global Ship Lease  vs.  Valhi Inc

Global Ship Lease

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Ship Lease has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Global Ship is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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 weak performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Global Ship and Valhi

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

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 CEOs Directory module to screen CEOs from public companies around the world.