Correlation Between Valvoline and Star Gas

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

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

Diversification Opportunities for Valvoline and Star Gas

0.05

Correlation Coefficient

Valvoline  Star Gas

Significant diversification

The 3 months correlation between Valvoline and Star is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Valvoline and Star Gas Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Star Gas Partners 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 Star Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Star Gas Partners has no effect on the direction of Valvoline i.e., Valvoline and Star Gas go up and down completely randomly.

Pair Corralation between Valvoline and Star Gas

Considering the 90-day investment horizon Valvoline is expected to under-perform the Star Gas. In addition to that, Valvoline is 1.16 times more volatile than Star Gas Partners. It trades about -0.02 of its total potential returns per unit of risk. Star Gas Partners is currently generating about 0.17 per unit of volatility. If you would invest  1,143  in Star Gas Partners on December 28, 2024 and sell it today you would earn a total of  194.00  from holding Star Gas Partners or generate 16.97% return on investment over 90 days.

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

Valvoline  vs.  Star Gas Partners

Valvoline

Risk-Adjusted Performance

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 fairly stable basic indicators, Valvoline is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Star Gas Partners

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Star Gas Partners are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Star Gas unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Valvoline and Star Gas

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

The idea behind Valvoline and Star Gas Partners 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 Commodity Directory module to find actively traded commodities issued by global exchanges.