Correlation Between Valhi and DAIMLERCHRYSLER

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

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

Diversification Opportunities for Valhi and DAIMLERCHRYSLER

0.42

Correlation Coefficient

Valhi  DAIMLERCHRYSLER

Very weak diversification

The 3 months correlation between Valhi and DAIMLERCHRYSLER is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Valhi Inc and DAIMLERCHRYSLER NORTH AMER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAIMLERCHRYSLER NORTH 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 DAIMLERCHRYSLER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DAIMLERCHRYSLER NORTH has no effect on the direction of Valhi i.e., Valhi and DAIMLERCHRYSLER go up and down completely randomly.

Pair Corralation between Valhi and DAIMLERCHRYSLER

Considering the 90-day investment horizon Valhi Inc is expected to under-perform the DAIMLERCHRYSLER. In addition to that, Valhi is 1.53 times more volatile than DAIMLERCHRYSLER NORTH AMER. It trades about -0.2 of its total potential returns per unit of risk. DAIMLERCHRYSLER NORTH AMER is currently generating about 0.15 per unit of volatility. If you would invest  11,932  in DAIMLERCHRYSLER NORTH AMER on October 6, 2024 and sell it today you would earn a total of  566.00  from holding DAIMLERCHRYSLER NORTH AMER or generate 4.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Valhi Inc  vs.  DAIMLERCHRYSLER NORTH AMER

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.

DAIMLERCHRYSLER NORTH

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DAIMLERCHRYSLER NORTH AMER are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, DAIMLERCHRYSLER is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Valhi and DAIMLERCHRYSLER

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

The idea behind Valhi Inc and DAIMLERCHRYSLER NORTH AMER 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.