Correlation Between Valero Energy and SECURITAS

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

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

Diversification Opportunities for Valero Energy and SECURITAS

0.1

Correlation Coefficient

Valero Energy  SECURITAS

Average diversification

The 3 months correlation between Valero and SECURITAS is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Valero Energy and SECURITAS B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SECURITAS B and Valero Energy 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 Valero Energy are associated (or correlated) with SECURITAS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SECURITAS B has no effect on the direction of Valero Energy i.e., Valero Energy and SECURITAS go up and down completely randomly.

Pair Corralation between Valero Energy and SECURITAS

Assuming the 90 days horizon Valero Energy is expected to under-perform the SECURITAS. But the stock apears to be less risky and, when comparing its historical volatility, Valero Energy is 1.96 times less risky than SECURITAS. The stock trades about -0.07 of its potential returns per unit of risk. The SECURITAS B is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  915.00  in SECURITAS B on October 7, 2024 and sell it today you would earn a total of  279.00  from holding SECURITAS B or generate 30.49% return on investment over 90 days.

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

Valero Energy  vs.  SECURITAS B

Valero Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valero Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

SECURITAS B

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SECURITAS B are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SECURITAS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Valero Energy and SECURITAS

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

The idea behind Valero Energy and SECURITAS B 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.