Correlation Between Valero Energy and Grupo KUO

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

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

Diversification Opportunities for Valero Energy and Grupo KUO

-0.03

Correlation Coefficient

Valero Energy  Grupo KUO

Good diversification

The 3 months correlation between Valero and Grupo is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Valero Energy and Grupo KUO SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo KUO SAB and Valero 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 Valero Energy are associated (or correlated) with Grupo KUO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo KUO SAB has no effect on the direction of Valero Energy i.e., Valero Energy and Grupo KUO go up and down completely randomly.

Pair Corralation between Valero Energy and Grupo KUO

Assuming the 90 days trading horizon Valero Energy is expected to under-perform the Grupo KUO. But the stock apears to be less risky and, when comparing its historical volatility, Valero Energy is 1.24 times less risky than Grupo KUO. The stock trades about -0.08 of its potential returns per unit of risk. The Grupo KUO SAB is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,260  in Grupo KUO SAB on September 29, 2024 and sell it today you would earn a total of  340.00  from holding Grupo KUO SAB or generate 7.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Valero Energy  vs.  Grupo KUO SAB

Valero Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valero Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Grupo KUO SAB

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo KUO SAB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Grupo KUO may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Valero Energy and Grupo KUO

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

The idea behind Valero Energy and Grupo KUO SAB 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.