Correlation Between Valvoline and Icad

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Can any of the company-specific risk be diversified away by investing in both Valvoline and Icad 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 Icad into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Valvoline and Icad Inc, you can compare the effects of market volatilities on Valvoline and Icad 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 Icad. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valvoline and Icad.

Diversification Opportunities for Valvoline and Icad

0.53
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Valvoline and Icad is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Valvoline and Icad Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icad Inc 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 Icad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icad Inc has no effect on the direction of Valvoline i.e., Valvoline and Icad go up and down completely randomly.

Pair Corralation between Valvoline and Icad

Considering the 90-day investment horizon Valvoline is expected to generate 0.45 times more return on investment than Icad. However, Valvoline is 2.24 times less risky than Icad. It trades about 0.03 of its potential returns per unit of risk. Icad Inc is currently generating about -0.05 per unit of risk. If you would invest  3,293  in Valvoline on October 30, 2022 and sell it today you would earn a total of  293.00  from holding Valvoline or generate 8.9% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy99.6%
ValuesDaily Returns

Valvoline  vs.  Icad Inc

 Performance (%) 
       Timeline  
Valvoline 
Valvoline Performance
17 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Valvoline are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Valvoline showed solid returns over the last few months and may actually be approaching a breakup point.

Valvoline Price Channel

Icad Inc 
Icad Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Icad Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Icad exhibited solid returns over the last few months and may actually be approaching a breakup point.

Icad Price Channel

Valvoline and Icad Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Valvoline and Icad

The main advantage of trading using opposite Valvoline and Icad positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valvoline position performs unexpectedly, Icad 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 Icad will offset losses from the drop in Icad's long position.
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The idea behind Valvoline and Icad Inc 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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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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