Correlation Between Valmont Industries and GENERAL

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

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

Diversification Opportunities for Valmont Industries and GENERAL

0.49

Correlation Coefficient

Valmont Industries  GENERAL

Very weak diversification

The 3 months correlation between Valmont and GENERAL is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Valmont Industries and GENERAL ELEC CAP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GENERAL ELEC CAP 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 GENERAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GENERAL ELEC CAP has no effect on the direction of Valmont Industries i.e., Valmont Industries and GENERAL go up and down completely randomly.

Pair Corralation between Valmont Industries and GENERAL

Considering the 90-day investment horizon Valmont Industries is expected to under-perform the GENERAL. In addition to that, Valmont Industries is 8.07 times more volatile than GENERAL ELEC CAP. It trades about -0.02 of its total potential returns per unit of risk. GENERAL ELEC CAP is currently generating about 0.41 per unit of volatility. If you would invest  9,741  in GENERAL ELEC CAP on December 23, 2024 and sell it today you would earn a total of  146.00  from holding GENERAL ELEC CAP or generate 1.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	14.75%
Values	Daily Returns

Valmont Industries  vs.  GENERAL ELEC CAP

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.

GENERAL ELEC CAP

Risk-Adjusted Performance

Very Strong

Over the last 90 days GENERAL ELEC CAP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat unsteady basic indicators, GENERAL may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Valmont Industries and GENERAL

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

The idea behind Valmont Industries and GENERAL ELEC CAP 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.