Correlation Between Valero Energy and Idemitsu Kosan

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

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

Diversification Opportunities for Valero Energy and Idemitsu Kosan

0.45

Correlation Coefficient

Valero Energy  Idemitsu Kosan

Very weak diversification

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

Pair Corralation between Valero Energy and Idemitsu Kosan

Considering the 90-day investment horizon Valero Energy is expected to under-perform the Idemitsu Kosan. But the stock apears to be less risky and, when comparing its historical volatility, Valero Energy is 2.42 times less risky than Idemitsu Kosan. The stock trades about -0.17 of its potential returns per unit of risk. The Idemitsu Kosan Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,287  in Idemitsu Kosan Co on October 11, 2024 and sell it today you would earn a total of  43.00  from holding Idemitsu Kosan Co or generate 3.34% return on investment over 90 days.

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

Valero Energy  vs.  Idemitsu Kosan Co

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 essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Idemitsu Kosan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Idemitsu Kosan Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Idemitsu Kosan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Valero Energy and Idemitsu Kosan

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

The idea behind Valero Energy and Idemitsu Kosan Co 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.