Correlation Between Valmont Industries and Steel Partners

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

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

Diversification Opportunities for Valmont Industries and Steel Partners

-0.26

Correlation Coefficient

Valmont Industries  Steel Partners

Very good diversification

The 3 months correlation between Valmont and Steel is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Valmont Industries and Steel Partners Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel Partners Holdings 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 Steel Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steel Partners Holdings has no effect on the direction of Valmont Industries i.e., Valmont Industries and Steel Partners go up and down completely randomly.

Pair Corralation between Valmont Industries and Steel Partners

Considering the 90-day investment horizon Valmont Industries is expected to generate 2.18 times less return on investment than Steel Partners. In addition to that, Valmont Industries is 1.07 times more volatile than Steel Partners Holdings. It trades about 0.01 of its total potential returns per unit of risk. Steel Partners Holdings is currently generating about 0.01 per unit of volatility. If you would invest  4,274  in Steel Partners Holdings on December 29, 2024 and sell it today you would lose (23.00) from holding Steel Partners Holdings or give up 0.54% of portfolio value over 90 days.

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

Valmont Industries  vs.  Steel Partners Holdings

Valmont Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Valmont Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, Valmont Industries is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Steel Partners Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Partners Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable essential indicators, Steel Partners is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Valmont Industries and Steel Partners

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

The idea behind Valmont Industries and Steel Partners Holdings 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.