Correlation Between Rocky Brands and Valhi

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

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

Diversification Opportunities for Rocky Brands and Valhi

0.53

Correlation Coefficient

Rocky Brands  Valhi

Very weak diversification

The 3 months correlation between Rocky and Valhi is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Rocky Brands and Valhi Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valhi Inc and Rocky Brands 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 Rocky Brands 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 Rocky Brands i.e., Rocky Brands and Valhi go up and down completely randomly.

Pair Corralation between Rocky Brands and Valhi

Given the investment horizon of 90 days Rocky Brands is expected to generate 1.17 times less return on investment than Valhi. In addition to that, Rocky Brands is 1.19 times more volatile than Valhi Inc. It trades about 0.01 of its total potential returns per unit of risk. Valhi Inc is currently generating about 0.02 per unit of volatility. If you would invest  2,233  in Valhi Inc on September 29, 2024 and sell it today you would lose (6.00) from holding Valhi Inc or give up 0.27% of portfolio value over 90 days.

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

Rocky Brands  vs.  Valhi Inc

Rocky Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rocky Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward-looking signals remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company 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 unfluctuating 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 Rocky Brands and Valhi

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

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.