Correlation Between NN and Valmont Industries

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

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

Diversification Opportunities for NN and Valmont Industries

0.19

Correlation Coefficient

NN  Valmont Industries

Average diversification

The 3 months correlation between NN and Valmont is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding NN Inc and Valmont Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valmont Industries and NN 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 NN Inc 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 NN i.e., NN and Valmont Industries go up and down completely randomly.

Pair Corralation between NN and Valmont Industries

Given the investment horizon of 90 days NN Inc is expected to generate 2.09 times more return on investment than Valmont Industries. However, NN is 2.09 times more volatile than Valmont Industries. It trades about 0.06 of its potential returns per unit of risk. Valmont Industries is currently generating about 0.02 per unit of risk. If you would invest  180.00  in NN Inc on September 2, 2024 and sell it today you would earn a total of  219.00  from holding NN Inc or generate 121.67% return on investment over 90 days.

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

NN Inc  vs.  Valmont Industries

NN Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NN Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, NN reported solid returns over the last few months and may actually be approaching a breakup point.

Valmont Industries

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Valmont Industries are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak primary indicators, Valmont Industries demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NN and Valmont Industries

The main advantage of trading using opposite NN and Valmont Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NN 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 NN Inc 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.