Correlation Between New Horizon and Valmont Industries

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

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

Diversification Opportunities for New Horizon and Valmont Industries

-0.43

Correlation Coefficient

New Horizon  Valmont Industries

Very good diversification

The 3 months correlation between New and Valmont is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding New Horizon Aircraft and Valmont Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valmont Industries and New Horizon 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 New Horizon Aircraft are associated (or correlated) with Valmont Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valmont Industries has no effect on the direction of New Horizon i.e., New Horizon and Valmont Industries go up and down completely randomly.

Pair Corralation between New Horizon and Valmont Industries

Given the investment horizon of 90 days New Horizon Aircraft is expected to under-perform the Valmont Industries. In addition to that, New Horizon is 4.62 times more volatile than Valmont Industries. It trades about -0.01 of its total potential returns per unit of risk. Valmont Industries is currently generating about 0.02 per unit of volatility. If you would invest  31,405  in Valmont Industries on October 26, 2024 and sell it today you would earn a total of  2,843  from holding Valmont Industries or generate 9.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	92.11%
Values	Daily Returns

New Horizon Aircraft  vs.  Valmont Industries

New Horizon Aircraft

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in New Horizon Aircraft are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, New Horizon reported solid returns over the last few months and may actually be approaching a breakup point.

Valmont Industries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Valmont Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong primary indicators, Valmont Industries is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with New Horizon and Valmont Industries

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

The idea behind New Horizon Aircraft and Valmont Industries 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.