Correlation Between Valmont Industries and Tejon Ranch

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

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

Diversification Opportunities for Valmont Industries and Tejon Ranch

0.35

Correlation Coefficient

Valmont Industries  Tejon Ranch

Weak diversification

The 3 months correlation between Valmont and Tejon is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Valmont Industries and Tejon Ranch Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tejon Ranch 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 Tejon Ranch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tejon Ranch has no effect on the direction of Valmont Industries i.e., Valmont Industries and Tejon Ranch go up and down completely randomly.

Pair Corralation between Valmont Industries and Tejon Ranch

Considering the 90-day investment horizon Valmont Industries is expected to generate 1.79 times more return on investment than Tejon Ranch. However, Valmont Industries is 1.79 times more volatile than Tejon Ranch Co. It trades about 0.01 of its potential returns per unit of risk. Tejon Ranch Co is currently generating about -0.03 per unit of risk. If you would invest  34,719  in Valmont Industries on November 28, 2024 and sell it today you would earn a total of  31.00  from holding Valmont Industries or generate 0.09% return on investment over 90 days.

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

Valmont Industries  vs.  Tejon Ranch Co

Valmont Industries

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Valmont Industries are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Tejon Ranch

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tejon Ranch Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Tejon Ranch is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Valmont Industries and Tejon Ranch

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

The idea behind Valmont Industries and Tejon Ranch Co 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.