Correlation Between Icahn Enterprises and Valvoline

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

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

Diversification Opportunities for Icahn Enterprises and Valvoline

-0.13

Correlation Coefficient

Icahn Enterprises  Valvoline

Good diversification

The 3 months correlation between Icahn and Valvoline is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Icahn Enterprises LP and Valvoline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valvoline and Icahn Enterprises 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 Icahn Enterprises LP are associated (or correlated) with Valvoline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valvoline has no effect on the direction of Icahn Enterprises i.e., Icahn Enterprises and Valvoline go up and down completely randomly.

Pair Corralation between Icahn Enterprises and Valvoline

Considering the 90-day investment horizon Icahn Enterprises LP is expected to under-perform the Valvoline. In addition to that, Icahn Enterprises is 1.07 times more volatile than Valvoline. It trades about -0.14 of its total potential returns per unit of risk. Valvoline is currently generating about -0.05 per unit of volatility. If you would invest  4,219  in Valvoline on March 9, 2024 and sell it today you would lose (73.00) from holding Valvoline or give up 1.73% of portfolio value over 90 days.

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

Icahn Enterprises LP  vs.  Valvoline

Icahn Enterprises

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Icahn Enterprises LP are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Icahn Enterprises is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

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 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.

Pair Trading with Icahn Enterprises and Valvoline

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

The idea behind Icahn Enterprises LP and Valvoline 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.