Correlation Between Wolfspeed and Valens

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

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

Diversification Opportunities for Wolfspeed and Valens

-0.15

Correlation Coefficient

Wolfspeed  Valens

Good diversification

The 3 months correlation between Wolfspeed and Valens is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Wolfspeed and Valens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valens and Wolfspeed 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 Wolfspeed are associated (or correlated) with Valens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valens has no effect on the direction of Wolfspeed i.e., Wolfspeed and Valens go up and down completely randomly.

Pair Corralation between Wolfspeed and Valens

Given the investment horizon of 90 days Wolfspeed is expected to under-perform the Valens. In addition to that, Wolfspeed is 3.63 times more volatile than Valens. It trades about -0.05 of its total potential returns per unit of risk. Valens is currently generating about -0.01 per unit of volatility. If you would invest  247.00  in Valens on February 12, 2024 and sell it today you would lose (1.00) from holding Valens or give up 0.4% of portfolio value over 90 days.

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

Wolfspeed  vs.  Valens

Wolfspeed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wolfspeed has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Valens

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Valens are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Valens is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Wolfspeed and Valens

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

The idea behind Wolfspeed and Valens 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.