Correlation Between SolarEdge Technologies and Valmont Industries

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

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

Diversification Opportunities for SolarEdge Technologies and Valmont Industries

0.58

Correlation Coefficient

SolarEdge Technologies  Valmont Industries

Very weak diversification

The 3 months correlation between SolarEdge and Valmont is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding SolarEdge Technologies and Valmont Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valmont Industries and SolarEdge Technologies 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 SolarEdge Technologies are associated (or correlated) with Valmont Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valmont Industries has no effect on the direction of SolarEdge Technologies i.e., SolarEdge Technologies and Valmont Industries go up and down completely randomly.

Pair Corralation between SolarEdge Technologies and Valmont Industries

Given the investment horizon of 90 days SolarEdge Technologies is expected to under-perform the Valmont Industries. But the stock apears to be less risky and, when comparing its historical volatility, SolarEdge Technologies is 1.13 times less risky than Valmont Industries. The stock trades about -0.16 of its potential returns per unit of risk. The Valmont Industries is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  22,034  in Valmont Industries on February 3, 2024 and sell it today you would earn a total of  2,587  from holding Valmont Industries or generate 11.74% return on investment over 90 days.

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

SolarEdge Technologies  vs.  Valmont Industries

SolarEdge Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SolarEdge Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, SolarEdge Technologies is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Valmont Industries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Valmont Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak primary indicators, Valmont Industries may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with SolarEdge Technologies and Valmont Industries

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

The idea behind SolarEdge Technologies and Valmont Industries 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.