Correlation Between Valero Energy and Broadridge Financial

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

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

Diversification Opportunities for Valero Energy and Broadridge Financial

-0.48

Correlation Coefficient

Valero Energy  Broadridge Financial

Very good diversification

The 3 months correlation between Valero and Broadridge is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Valero Energy and Broadridge Financial Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadridge Financial 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 Broadridge Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadridge Financial has no effect on the direction of Valero Energy i.e., Valero Energy and Broadridge Financial go up and down completely randomly.

Pair Corralation between Valero Energy and Broadridge Financial

Assuming the 90 days trading horizon Valero Energy is expected to under-perform the Broadridge Financial. In addition to that, Valero Energy is 20.29 times more volatile than Broadridge Financial Solutions,. It trades about -0.15 of its total potential returns per unit of risk. Broadridge Financial Solutions, is currently generating about 0.24 per unit of volatility. If you would invest  26,209  in Broadridge Financial Solutions, on October 10, 2024 and sell it today you would earn a total of  89.00  from holding Broadridge Financial Solutions, or generate 0.34% return on investment over 90 days.

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

Valero Energy  vs.  Broadridge Financial Solutions

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. Despite somewhat strong basic indicators, Valero Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Broadridge Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Broadridge Financial Solutions, are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Broadridge Financial 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 Broadridge Financial

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

The idea behind Valero Energy and Broadridge Financial Solutions, 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.