Correlation Between Valens and Globalfoundries

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

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

Diversification Opportunities for Valens and Globalfoundries

0.09

Correlation Coefficient

Valens  Globalfoundries

Significant diversification

The 3 months correlation between Valens and Globalfoundries is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Valens and Globalfoundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globalfoundries 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 Globalfoundries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globalfoundries has no effect on the direction of Valens i.e., Valens and Globalfoundries go up and down completely randomly.

Pair Corralation between Valens and Globalfoundries

Considering the 90-day investment horizon Valens is expected to generate 2.9 times more return on investment than Globalfoundries. However, Valens is 2.9 times more volatile than Globalfoundries. It trades about 0.12 of its potential returns per unit of risk. Globalfoundries is currently generating about 0.16 per unit of risk. If you would invest  191.00  in Valens on September 16, 2024 and sell it today you would earn a total of  22.00  from holding Valens or generate 11.52% return on investment over 90 days.

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

Valens  vs.  Globalfoundries

Valens

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Valens are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Valens is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Globalfoundries

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Globalfoundries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Globalfoundries unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Valens and Globalfoundries

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

The idea behind Valens and Globalfoundries 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.