Correlation Between Valvoline and Hot Mamas

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

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

Diversification Opportunities for Valvoline and Hot Mamas

0.0

Correlation Coefficient

Valvoline  Hot Mamas

Pay attention - limited upside

The 3 months correlation between Valvoline and Hot is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Valvoline and Hot Mamas Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hot Mamas Foods and Valvoline 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 Valvoline are associated (or correlated) with Hot Mamas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hot Mamas Foods has no effect on the direction of Valvoline i.e., Valvoline and Hot Mamas go up and down completely randomly.

Pair Corralation between Valvoline and Hot Mamas

If you would invest (100.00) in Hot Mamas Foods on January 25, 2024 and sell it today you would earn a total of  100.00  from holding Hot Mamas Foods or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Valvoline  vs.  Hot Mamas Foods

Valvoline

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Valvoline are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Valvoline showed solid returns over the last few months and may actually be approaching a breakup point.

Hot Mamas Foods

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Valvoline and Hot Mamas

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

The idea behind Valvoline and Hot Mamas Foods 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.