Correlation Between Valmont Industries and Grocery Outlet

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

By analyzing existing cross correlation between Valmont Industries and Grocery Outlet Holding, you can compare the effects of market volatilities on Valmont Industries and Grocery Outlet 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 Valmont Industries with a short position of Grocery Outlet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valmont Industries and Grocery Outlet.

Diversification Opportunities for Valmont Industries and Grocery Outlet

0.71

Correlation Coefficient

Valmont Industries  Grocery Outlet

Poor diversification

The 3 months correlation between Valmont and Grocery is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Valmont Industries and Grocery Outlet Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grocery Outlet Holding and Valmont Industries 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 Valmont Industries are associated (or correlated) with Grocery Outlet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grocery Outlet Holding has no effect on the direction of Valmont Industries i.e., Valmont Industries and Grocery Outlet go up and down completely randomly.

Pair Corralation between Valmont Industries and Grocery Outlet

Considering the 90-day investment horizon Valmont Industries is expected to generate 0.38 times more return on investment than Grocery Outlet. However, Valmont Industries is 2.63 times less risky than Grocery Outlet. It trades about -0.35 of its potential returns per unit of risk. Grocery Outlet Holding is currently generating about -0.24 per unit of risk. If you would invest  33,665  in Valmont Industries on October 9, 2024 and sell it today you would lose (2,887) from holding Valmont Industries or give up 8.58% of portfolio value over 90 days.

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

Valmont Industries  vs.  Grocery Outlet Holding

Valmont Industries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Valmont Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal primary indicators, Valmont Industries may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Grocery Outlet Holding

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Grocery Outlet Holding are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Grocery Outlet is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Valmont Industries and Grocery Outlet

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

The idea behind Valmont Industries and Grocery Outlet Holding 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.