Correlation Between Valens and Cheniere Energy

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

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

Diversification Opportunities for Valens and Cheniere Energy

0.62

Correlation Coefficient

Valens  Cheniere Energy

Poor diversification

The 3 months correlation between Valens and Cheniere is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Valens and Cheniere Energy Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheniere Energy Partners and Valens 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 Valens are associated (or correlated) with Cheniere Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheniere Energy Partners has no effect on the direction of Valens i.e., Valens and Cheniere Energy go up and down completely randomly.

Pair Corralation between Valens and Cheniere Energy

Considering the 90-day investment horizon Valens is expected to generate 3.15 times more return on investment than Cheniere Energy. However, Valens is 3.15 times more volatile than Cheniere Energy Partners. It trades about 0.18 of its potential returns per unit of risk. Cheniere Energy Partners is currently generating about 0.26 per unit of risk. If you would invest  194.00  in Valens on October 20, 2024 and sell it today you would earn a total of  141.00  from holding Valens or generate 72.68% return on investment over 90 days.

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

Valens  vs.  Cheniere Energy Partners

Valens

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Valens are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile essential indicators, Valens displayed solid returns over the last few months and may actually be approaching a breakup point.

Cheniere Energy Partners

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cheniere Energy Partners are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Cheniere Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Valens and Cheniere Energy

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

The idea behind Valens and Cheniere Energy Partners 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.