Correlation Between Valhi and Global Ship

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

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

Diversification Opportunities for Valhi and Global Ship

-0.13

Correlation Coefficient

Valhi  Global Ship

Good diversification

The 3 months correlation between Valhi and Global is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Valhi Inc and Global Ship Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Ship Lease 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 Global Ship. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Ship Lease has no effect on the direction of Valhi i.e., Valhi and Global Ship go up and down completely randomly.

Pair Corralation between Valhi and Global Ship

Considering the 90-day investment horizon Valhi Inc is expected to generate 4.43 times more return on investment than Global Ship. However, Valhi is 4.43 times more volatile than Global Ship Lease. It trades about 0.08 of its potential returns per unit of risk. Global Ship Lease is currently generating about 0.04 per unit of risk. If you would invest  1,307  in Valhi Inc on October 2, 2024 and sell it today you would earn a total of  950.00  from holding Valhi Inc or generate 72.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.56%
Values	Daily Returns

Valhi Inc  vs.  Global Ship Lease

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 weak 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.

Global Ship Lease

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Ship Lease has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Global Ship is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Valhi and Global Ship

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

The idea behind Valhi Inc and Global Ship Lease 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 Anywhere module to track or share privately all of your investments from the convenience of any device.