Correlation Between Valero Energy and Yelp
Can any of the company-specific risk be diversified away by investing in both Valero Energy and Yelp 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 Yelp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Valero Energy and Yelp Inc, you can compare the effects of market volatilities on Valero Energy and Yelp 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 Yelp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valero Energy and Yelp.
Diversification Opportunities for Valero Energy and Yelp
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Valero and Yelp is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Valero Energy and Yelp Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yelp Inc 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 Yelp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yelp Inc has no effect on the direction of Valero Energy i.e., Valero Energy and Yelp go up and down completely randomly.
Pair Corralation between Valero Energy and Yelp
Considering the 90-day investment horizon Valero Energy is expected to generate 1.42 times more return on investment than Yelp. However, Valero Energy is 1.42 times more volatile than Yelp Inc. It trades about 0.27 of its potential returns per unit of risk. Yelp Inc is currently generating about 0.13 per unit of risk. If you would invest 13,503 in Valero Energy on January 20, 2024 and sell it today you would earn a total of 2,746 from holding Valero Energy or generate 20.34% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Valero Energy vs. Yelp Inc
Performance |
Timeline |
Valero Energy |
Yelp Inc |
Valero Energy and Yelp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Valero Energy and Yelp
The main advantage of trading using opposite Valero Energy and Yelp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valero Energy position performs unexpectedly, Yelp 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 Yelp will offset losses from the drop in Yelp's long position.Valero Energy vs. Delek Logistics Partners | Valero Energy vs. Crossamerica Partners LP | Valero Energy vs. Sunoco LP |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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