Correlation Between Valero Energy and Valero Energy

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

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

Diversification Opportunities for Valero Energy and Valero Energy

0.97

Correlation Coefficient

Valero Energy  Valero Energy

Almost no diversification

The 3 months correlation between Valero and Valero is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Valero Energy and Valero Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valero Energy Corp 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 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 Corp has no effect on the direction of Valero Energy i.e., Valero Energy and Valero Energy go up and down completely randomly.

Pair Corralation between Valero Energy and Valero Energy

Assuming the 90 days horizon Valero Energy is expected to generate 1.06 times more return on investment than Valero Energy. However, Valero Energy is 1.06 times more volatile than Valero Energy Corp. It trades about -0.07 of its potential returns per unit of risk. Valero Energy Corp is currently generating about -0.09 per unit of risk. If you would invest  12,547  in Valero Energy on October 7, 2024 and sell it today you would lose (653.00) from holding Valero Energy or give up 5.2% of portfolio value over 90 days.

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

Valero Energy  vs.  Valero Energy Corp

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.

Valero Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valero Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Valero Energy and Valero Energy

The main advantage of trading using opposite Valero Energy and Valero Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valero Energy 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 Valero Energy and Valero Energy Corp 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.