Correlation Between Valmont Industries and Swire Pacific

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

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

Diversification Opportunities for Valmont Industries and Swire Pacific

0.29

Correlation Coefficient

Valmont Industries  Swire Pacific

Modest diversification

The 3 months correlation between Valmont and Swire is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Valmont Industries and Swire Pacific Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swire Pacific 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 Swire Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swire Pacific has no effect on the direction of Valmont Industries i.e., Valmont Industries and Swire Pacific go up and down completely randomly.

Pair Corralation between Valmont Industries and Swire Pacific

Considering the 90-day investment horizon Valmont Industries is expected to generate 0.54 times more return on investment than Swire Pacific. However, Valmont Industries is 1.85 times less risky than Swire Pacific. It trades about 0.19 of its potential returns per unit of risk. Swire Pacific Ltd is currently generating about 0.02 per unit of risk. If you would invest  27,607  in Valmont Industries on September 1, 2024 and sell it today you would earn a total of  7,179  from holding Valmont Industries or generate 26.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Valmont Industries  vs.  Swire Pacific Ltd

Valmont Industries

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Valmont Industries are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak primary indicators, Valmont Industries demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Swire Pacific

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Swire Pacific Ltd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental drivers, Swire Pacific 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 Swire Pacific

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

The idea behind Valmont Industries and Swire Pacific Ltd 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.