Correlation Between Valeo SE and Knife River

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

By analyzing existing cross correlation between Valeo SE and Knife River, you can compare the effects of market volatilities on Valeo SE and Knife River 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 Valeo SE with a short position of Knife River. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valeo SE and Knife River.

Diversification Opportunities for Valeo SE and Knife River

-0.84

Correlation Coefficient

Valeo SE  Knife River

Pay attention - limited upside

The 3 months correlation between Valeo and Knife is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Valeo SE and Knife River in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knife River and Valeo SE 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 Valeo SE are associated (or correlated) with Knife River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knife River has no effect on the direction of Valeo SE i.e., Valeo SE and Knife River go up and down completely randomly.

Pair Corralation between Valeo SE and Knife River

Assuming the 90 days horizon Valeo SE is expected to under-perform the Knife River. In addition to that, Valeo SE is 1.51 times more volatile than Knife River. It trades about -0.06 of its total potential returns per unit of risk. Knife River is currently generating about 0.15 per unit of volatility. If you would invest  7,030  in Knife River on September 22, 2024 and sell it today you would earn a total of  3,541  from holding Knife River or generate 50.37% return on investment over 90 days.

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

Valeo SE  vs.  Knife River

Valeo SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valeo SE 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 and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Knife River

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Knife River are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Knife River reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Valeo SE and Knife River

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

The idea behind Valeo SE and Knife River 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.

Check out your portfolio center.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.