Correlation Between Valero Energy and KLA

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

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

Diversification Opportunities for Valero Energy and KLA

0.41

Correlation Coefficient

Valero Energy  KLA

Very weak diversification

The 3 months correlation between Valero and KLA is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Valero Energy and KLA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA Corporation 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 KLA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KLA Corporation has no effect on the direction of Valero Energy i.e., Valero Energy and KLA go up and down completely randomly.

Pair Corralation between Valero Energy and KLA

Assuming the 90 days trading horizon Valero Energy is expected to generate 1.1 times more return on investment than KLA. However, Valero Energy is 1.1 times more volatile than KLA Corporation. It trades about 0.05 of its potential returns per unit of risk. KLA Corporation is currently generating about 0.01 per unit of risk. If you would invest  36,695  in Valero Energy on December 24, 2024 and sell it today you would earn a total of  1,597  from holding Valero Energy or generate 4.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	81.36%
Values	Daily Returns

Valero Energy  vs.  KLA Corp.

Valero Energy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Valero Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Valero Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

KLA Corporation

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KLA Corporation are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, KLA 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 KLA

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

The idea behind Valero Energy and KLA Corporation 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.