Correlation Between Valhi and Entheon Biomedical

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

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

Diversification Opportunities for Valhi and Entheon Biomedical

-0.33

Correlation Coefficient

Valhi  Entheon Biomedical

Very good diversification

The 3 months correlation between Valhi and Entheon is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Valhi Inc and Entheon Biomedical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entheon Biomedical 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 Entheon Biomedical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entheon Biomedical Corp has no effect on the direction of Valhi i.e., Valhi and Entheon Biomedical go up and down completely randomly.

Pair Corralation between Valhi and Entheon Biomedical

Considering the 90-day investment horizon Valhi Inc is expected to under-perform the Entheon Biomedical. But the stock apears to be less risky and, when comparing its historical volatility, Valhi Inc is 5.95 times less risky than Entheon Biomedical. The stock trades about -0.4 of its potential returns per unit of risk. The Entheon Biomedical Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  9.80  in Entheon Biomedical Corp on September 27, 2024 and sell it today you would earn a total of  2.20  from holding Entheon Biomedical Corp or generate 22.45% return on investment over 90 days.

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

Valhi Inc  vs.  Entheon Biomedical 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.

Entheon Biomedical Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Entheon Biomedical Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental drivers, Entheon Biomedical reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Valhi and Entheon Biomedical

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

The idea behind Valhi Inc and Entheon Biomedical 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.