Correlation Between Valhi and Agnico Eagle

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

By analyzing existing cross correlation between Valhi Inc and Agnico Eagle Mines, you can compare the effects of market volatilities on Valhi and Agnico Eagle 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 Agnico Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valhi and Agnico Eagle.

Diversification Opportunities for Valhi and Agnico Eagle

0.59

Correlation Coefficient

Valhi  Agnico Eagle

Very weak diversification

The 3 months correlation between Valhi and Agnico is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Valhi Inc and Agnico Eagle Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agnico Eagle Mines 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 Agnico Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agnico Eagle Mines has no effect on the direction of Valhi i.e., Valhi and Agnico Eagle go up and down completely randomly.

Pair Corralation between Valhi and Agnico Eagle

Considering the 90-day investment horizon Valhi Inc is expected to generate 1.76 times more return on investment than Agnico Eagle. However, Valhi is 1.76 times more volatile than Agnico Eagle Mines. It trades about 0.41 of its potential returns per unit of risk. Agnico Eagle Mines is currently generating about -0.02 per unit of risk. If you would invest  1,515  in Valhi Inc on March 7, 2024 and sell it today you would earn a total of  456.00  from holding Valhi Inc or generate 30.1% return on investment over 90 days.

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

Valhi Inc  vs.  Agnico Eagle Mines

Valhi Inc

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Valhi Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical indicators, Valhi demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Agnico Eagle Mines

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Agnico Eagle Mines are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile technical and fundamental indicators, Agnico Eagle displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Valhi and Agnico Eagle

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

The idea behind Valhi Inc and Agnico Eagle Mines 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 Valuation module to check real value of public entities based on technical and fundamental data.