Correlation Between Valens and NCR Corp

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

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

Diversification Opportunities for Valens and NCR Corp

-0.45

Correlation Coefficient

Valens  NCR Corp

Very good diversification

The 3 months correlation between Valens and NCR is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Valens and NCR Corp Pref in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NCR Corp Pref 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 NCR Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NCR Corp Pref has no effect on the direction of Valens i.e., Valens and NCR Corp go up and down completely randomly.

Pair Corralation between Valens and NCR Corp

Considering the 90-day investment horizon Valens is expected to generate 8.15 times more return on investment than NCR Corp. However, Valens is 8.15 times more volatile than NCR Corp Pref. It trades about 0.02 of its potential returns per unit of risk. NCR Corp Pref is currently generating about -0.02 per unit of risk. If you would invest  236.00  in Valens on September 28, 2024 and sell it today you would lose (8.00) from holding Valens or give up 3.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	60.22%
Values	Daily Returns

Valens  vs.  NCR Corp Pref

Valens

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valens has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Valens is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

NCR Corp Pref

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NCR Corp Pref has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, NCR Corp is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Valens and NCR Corp

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

The idea behind Valens and NCR Corp Pref 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 Global Correlations module to find global opportunities by holding instruments from different markets.