Correlation Between Valero Energy and Kunlun Energy

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

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

Diversification Opportunities for Valero Energy and Kunlun Energy

-0.61

Correlation Coefficient

Valero Energy  Kunlun Energy

Excellent diversification

The 3 months correlation between Valero and Kunlun is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Valero Energy and Kunlun Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kunlun Energy 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 Kunlun Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kunlun Energy has no effect on the direction of Valero Energy i.e., Valero Energy and Kunlun Energy go up and down completely randomly.

Pair Corralation between Valero Energy and Kunlun Energy

Considering the 90-day investment horizon Valero Energy is expected to generate 0.53 times more return on investment than Kunlun Energy. However, Valero Energy is 1.89 times less risky than Kunlun Energy. It trades about 0.43 of its potential returns per unit of risk. Kunlun Energy Co is currently generating about -0.2 per unit of risk. If you would invest  11,968  in Valero Energy on October 27, 2024 and sell it today you would earn a total of  1,995  from holding Valero Energy or generate 16.67% return on investment over 90 days.

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

Valero Energy  vs.  Kunlun Energy Co

Valero Energy

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Valero Energy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, Valero Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Kunlun Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Valero Energy and Kunlun Energy

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

The idea behind Valero Energy and Kunlun Energy 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.

Check out your portfolio center.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.