Correlation Between Valvoline and Blue Dolphin

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

By analyzing existing cross correlation between Valvoline and Blue Dolphin Energy, you can compare the effects of market volatilities on Valvoline and Blue Dolphin 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 Valvoline with a short position of Blue Dolphin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valvoline and Blue Dolphin.

Diversification Opportunities for Valvoline and Blue Dolphin

-0.83

Correlation Coefficient

Valvoline  Blue Dolphin

Pay attention - limited upside

The 3 months correlation between Valvoline and Blue is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Valvoline and Blue Dolphin Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Dolphin Energy and Valvoline 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 Valvoline are associated (or correlated) with Blue Dolphin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Dolphin Energy has no effect on the direction of Valvoline i.e., Valvoline and Blue Dolphin go up and down completely randomly.

Pair Corralation between Valvoline and Blue Dolphin

Considering the 90-day investment horizon Valvoline is expected to generate 81.66 times less return on investment than Blue Dolphin. But when comparing it to its historical volatility, Valvoline is 4.94 times less risky than Blue Dolphin. It trades about 0.01 of its potential returns per unit of risk. Blue Dolphin Energy is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  149.00  in Blue Dolphin Energy on October 9, 2024 and sell it today you would earn a total of  457.00  from holding Blue Dolphin Energy or generate 306.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	26.26%
Values	Daily Returns

Valvoline  vs.  Blue Dolphin Energy

Valvoline

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valvoline has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Blue Dolphin Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blue Dolphin Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Blue Dolphin is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Valvoline and Blue Dolphin

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

The idea behind Valvoline and Blue Dolphin Energy 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.