Correlation Between Valmont Industries and Halma PLC

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

By analyzing existing cross correlation between Valmont Industries and Halma PLC, you can compare the effects of market volatilities on Valmont Industries and Halma PLC 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 Halma PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valmont Industries and Halma PLC.

Diversification Opportunities for Valmont Industries and Halma PLC

0.59

Correlation Coefficient

Valmont Industries  Halma PLC

Very weak diversification

The 3 months correlation between Valmont and Halma is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Valmont Industries and Halma PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Halma PLC 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 Halma PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Halma PLC has no effect on the direction of Valmont Industries i.e., Valmont Industries and Halma PLC go up and down completely randomly.

Pair Corralation between Valmont Industries and Halma PLC

Considering the 90-day investment horizon Valmont Industries is expected to generate 1.32 times more return on investment than Halma PLC. However, Valmont Industries is 1.32 times more volatile than Halma PLC. It trades about 0.06 of its potential returns per unit of risk. Halma PLC is currently generating about 0.0 per unit of risk. If you would invest  30,761  in Valmont Industries on December 20, 2024 and sell it today you would earn a total of  2,314  from holding Valmont Industries or generate 7.52% return on investment over 90 days.

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

Valmont Industries  vs.  Halma PLC

Valmont Industries

Risk-Adjusted Performance

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 April 2025.

Halma PLC

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Valmont Industries and Halma PLC

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

The idea behind Valmont Industries and Halma PLC 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.