Correlation Between Valmont Industries and NN

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

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

Diversification Opportunities for Valmont Industries and NN

0.16

Correlation Coefficient

Valmont Industries  NN

Average diversification

The 3 months correlation between Valmont and NN is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Valmont Industries and NN Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NN Inc 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 NN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NN Inc has no effect on the direction of Valmont Industries i.e., Valmont Industries and NN go up and down completely randomly.

Pair Corralation between Valmont Industries and NN

Considering the 90-day investment horizon Valmont Industries is expected to generate 0.54 times more return on investment than NN. However, Valmont Industries is 1.86 times less risky than NN. It trades about 0.15 of its potential returns per unit of risk. NN Inc is currently generating about 0.07 per unit of risk. If you would invest  24,864  in Valmont Industries on August 31, 2024 and sell it today you would earn a total of  10,350  from holding Valmont Industries or generate 41.63% return on investment over 90 days.

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

Valmont Industries  vs.  NN Inc

Valmont Industries

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Valmont Industries are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal primary indicators, Valmont Industries demonstrated solid returns over the last few months and may actually be approaching a breakup point.

NN Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NN Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, NN may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Valmont Industries and NN

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

The idea behind Valmont Industries and NN Inc 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.