Correlation Between Lumen Technologies, and Valero Energy

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

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

Diversification Opportunities for Lumen Technologies, and Valero Energy

-0.07

Correlation Coefficient

Lumen Technologies,  Valero Energy

Good diversification

The 3 months correlation between Lumen and Valero is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Lumen Technologies, and Valero Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valero Energy and Lumen Technologies, 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 Lumen Technologies, are associated (or correlated) with Valero Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valero Energy has no effect on the direction of Lumen Technologies, i.e., Lumen Technologies, and Valero Energy go up and down completely randomly.

Pair Corralation between Lumen Technologies, and Valero Energy

Assuming the 90 days trading horizon Lumen Technologies, is expected to under-perform the Valero Energy. In addition to that, Lumen Technologies, is 2.03 times more volatile than Valero Energy. It trades about -0.09 of its total potential returns per unit of risk. Valero Energy is currently generating about 0.04 per unit of volatility. If you would invest  36,695  in Valero Energy on December 25, 2024 and sell it today you would earn a total of  1,305  from holding Valero Energy or generate 3.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	80.0%
Values	Daily Returns

Lumen Technologies,  vs.  Valero Energy

Lumen Technologies,

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lumen Technologies, 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 primary indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Valero Energy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Valero Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Valero Energy is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lumen Technologies, and Valero Energy

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

The idea behind Lumen Technologies, and Valero Energy 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.