Correlation Between Valero Energy and Rubis

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

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

Diversification Opportunities for Valero Energy and Rubis

0.76

Correlation Coefficient

Valero Energy  Rubis

Poor diversification

The 3 months correlation between Valero and Rubis is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Valero Energy and Rubis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rubis and Valero Energy 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 Valero Energy are associated (or correlated) with Rubis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rubis has no effect on the direction of Valero Energy i.e., Valero Energy and Rubis go up and down completely randomly.

Pair Corralation between Valero Energy and Rubis

Considering the 90-day investment horizon Valero Energy is expected to under-perform the Rubis. But the stock apears to be less risky and, when comparing its historical volatility, Valero Energy is 1.8 times less risky than Rubis. The stock trades about -0.04 of its potential returns per unit of risk. The Rubis is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,935  in Rubis on February 24, 2024 and sell it today you would earn a total of  420.00  from holding Rubis or generate 14.31% return on investment over 90 days.

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

Valero Energy  vs.  Rubis

Valero Energy

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Valero Energy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, Valero Energy may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Rubis

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rubis are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Rubis reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Valero Energy and Rubis

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

The idea behind Valero Energy and Rubis 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.