Correlation Between Valhi and Pop Culture

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

By analyzing existing cross correlation between Valhi Inc and Pop Culture Group, you can compare the effects of market volatilities on Valhi and Pop Culture 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 Pop Culture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valhi and Pop Culture.

Diversification Opportunities for Valhi and Pop Culture

0.55

Correlation Coefficient

Valhi  Pop Culture

Very weak diversification

The 3 months correlation between Valhi and Pop is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Valhi Inc and Pop Culture Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pop Culture Group 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 Pop Culture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pop Culture Group has no effect on the direction of Valhi i.e., Valhi and Pop Culture go up and down completely randomly.

Pair Corralation between Valhi and Pop Culture

Considering the 90-day investment horizon Valhi Inc is expected to under-perform the Pop Culture. In addition to that, Valhi is 1.0 times more volatile than Pop Culture Group. It trades about -0.11 of its total potential returns per unit of risk. Pop Culture Group is currently generating about 0.11 per unit of volatility. If you would invest  116.00  in Pop Culture Group on October 8, 2024 and sell it today you would earn a total of  36.00  from holding Pop Culture Group or generate 31.03% return on investment over 90 days.

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

Valhi Inc  vs.  Pop Culture Group

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 February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pop Culture Group

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pop Culture Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Pop Culture reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Valhi and Pop Culture

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

The idea behind Valhi Inc and Pop Culture Group 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.