Correlation Between Valeura Energy and Leons Furniture

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

By analyzing existing cross correlation between Valeura Energy and Leons Furniture Limited, you can compare the effects of market volatilities on Valeura Energy and Leons Furniture 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 Valeura Energy with a short position of Leons Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valeura Energy and Leons Furniture.

Diversification Opportunities for Valeura Energy and Leons Furniture

-0.8

Correlation Coefficient

Valeura Energy  Leons Furniture

Pay attention - limited upside

The 3 months correlation between Valeura and Leons is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Valeura Energy and Leons Furniture Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leons Furniture and Valeura Energy 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 Valeura Energy are associated (or correlated) with Leons Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leons Furniture has no effect on the direction of Valeura Energy i.e., Valeura Energy and Leons Furniture go up and down completely randomly.

Pair Corralation between Valeura Energy and Leons Furniture

Assuming the 90 days trading horizon Valeura Energy is expected to generate 3.12 times more return on investment than Leons Furniture. However, Valeura Energy is 3.12 times more volatile than Leons Furniture Limited. It trades about 0.33 of its potential returns per unit of risk. Leons Furniture Limited is currently generating about -0.03 per unit of risk. If you would invest  519.00  in Valeura Energy on September 27, 2024 and sell it today you would earn a total of  141.00  from holding Valeura Energy or generate 27.17% return on investment over 90 days.

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

Valeura Energy  vs.  Leons Furniture Limited

Valeura Energy

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Valeura Energy are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical and fundamental indicators, Valeura Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Leons Furniture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leons Furniture Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Valeura Energy and Leons Furniture

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

The idea behind Valeura Energy and Leons Furniture Limited 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.