Correlation Between Valhi and Loews Corp
Can any of the company-specific risk be diversified away by investing in both Valhi and Loews Corp 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 Valhi and Loews Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Valhi Inc and Loews Corp, you can compare the effects of market volatilities on Valhi and Loews Corp 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 Valhi with a short position of Loews Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valhi and Loews Corp.
Diversification Opportunities for Valhi and Loews Corp
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Valhi and Loews is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Valhi Inc and Loews Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loews Corp and Valhi 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 Valhi Inc are associated (or correlated) with Loews Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loews Corp has no effect on the direction of Valhi i.e., Valhi and Loews Corp go up and down completely randomly.
Pair Corralation between Valhi and Loews Corp
Considering the 90-day investment horizon Valhi Inc is expected to under-perform the Loews Corp. In addition to that, Valhi is 2.11 times more volatile than Loews Corp. It trades about -0.35 of its total potential returns per unit of risk. Loews Corp is currently generating about 0.0 per unit of volatility. If you would invest 7,689 in Loews Corp on January 26, 2024 and sell it today you would lose (8.00) from holding Loews Corp or give up 0.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Valhi Inc vs. Loews Corp
Performance |
| Timeline |
| Valhi Inc |
| Loews Corp |
Valhi and Loews Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Valhi and Loews Corp
The main advantage of trading using opposite Valhi and Loews Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valhi position performs unexpectedly, Loews Corp 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 Loews Corp will offset losses from the drop in Loews Corp's long position.The idea behind Valhi Inc and Loews Corp 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.| Loews Corp vs. Horace Mann Educators | Loews Corp vs. Global Indemnity PLC | Loews Corp vs. Selective Insurance Group | Loews Corp vs. Kemper |
Check out your portfolio center.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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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