Correlation Between Seaboard and Valmont Industries

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

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

Diversification Opportunities for Seaboard and Valmont Industries

-0.92

Correlation Coefficient

Seaboard  Valmont Industries

Pay attention - limited upside

The 3 months correlation between Seaboard and Valmont is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding Seaboard and Valmont Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valmont Industries and Seaboard 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 Seaboard 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 Seaboard i.e., Seaboard and Valmont Industries go up and down completely randomly.

Pair Corralation between Seaboard and Valmont Industries

Considering the 90-day investment horizon Seaboard is expected to under-perform the Valmont Industries. But the stock apears to be less risky and, when comparing its historical volatility, Seaboard is 1.53 times less risky than Valmont Industries. The stock trades about -0.22 of its potential returns per unit of risk. The Valmont Industries is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  27,607  in Valmont Industries on September 1, 2024 and sell it today you would earn a total of  7,179  from holding Valmont Industries or generate 26.0% return on investment over 90 days.

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

Seaboard  vs.  Valmont Industries

Seaboard

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seaboard 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 and fundamental indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

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 Seaboard and Valmont Industries

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

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.