Correlation Between Valhi and Crown

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

By analyzing existing cross correlation between Valhi Inc and Crown Cork 7375, you can compare the effects of market volatilities on Valhi and Crown 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 Crown. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valhi and Crown.

Diversification Opportunities for Valhi and Crown

0.21

Correlation Coefficient

Valhi  Crown

Modest diversification

The 3 months correlation between Valhi and Crown is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Valhi Inc and Crown Cork 7375 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crown Cork 7375 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 Crown. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crown Cork 7375 has no effect on the direction of Valhi i.e., Valhi and Crown go up and down completely randomly.

Pair Corralation between Valhi and Crown

Considering the 90-day investment horizon Valhi Inc is expected to under-perform the Crown. In addition to that, Valhi is 4.49 times more volatile than Crown Cork 7375. It trades about -0.12 of its total potential returns per unit of risk. Crown Cork 7375 is currently generating about 0.09 per unit of volatility. If you would invest  10,250  in Crown Cork 7375 on December 24, 2024 and sell it today you would earn a total of  369.00  from holding Crown Cork 7375 or generate 3.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

Valhi Inc  vs.  Crown Cork 7375

Valhi Inc

Risk-Adjusted Performance

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

Crown Cork 7375

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Crown Cork 7375 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Crown 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 Crown

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

The idea behind Valhi Inc and Crown Cork 7375 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.