Correlation Between Valhi and Avient Corp

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

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

Diversification Opportunities for Valhi and Avient Corp

0.25

Correlation Coefficient

Valhi  Avient Corp

Modest diversification

The 3 months correlation between Valhi and Avient is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Valhi Inc and Avient Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avient Corp and Valhi 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 Valhi Inc are associated (or correlated) with Avient Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avient Corp has no effect on the direction of Valhi i.e., Valhi and Avient Corp go up and down completely randomly.

Pair Corralation between Valhi and Avient Corp

Considering the 90-day investment horizon Valhi Inc is expected to under-perform the Avient Corp. In addition to that, Valhi is 2.57 times more volatile than Avient Corp. It trades about -0.11 of its total potential returns per unit of risk. Avient Corp is currently generating about -0.15 per unit of volatility. If you would invest  5,004  in Avient Corp on September 29, 2024 and sell it today you would lose (867.00) from holding Avient Corp or give up 17.33% of portfolio value over 90 days.

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

Valhi Inc  vs.  Avient Corp

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.

Avient Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avient Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Valhi and Avient Corp

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

The idea behind Valhi Inc and Avient 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.