Correlation Between Valmont Industries and Beijing Enterprises

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

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

Diversification Opportunities for Valmont Industries and Beijing Enterprises

0.25

Correlation Coefficient

Valmont Industries  Beijing Enterprises

Modest diversification

The 3 months correlation between Valmont and Beijing is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Valmont Industries and Beijing Enterprises Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Enterprises and Valmont Industries 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 Valmont Industries are associated (or correlated) with Beijing Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Enterprises has no effect on the direction of Valmont Industries i.e., Valmont Industries and Beijing Enterprises go up and down completely randomly.

Pair Corralation between Valmont Industries and Beijing Enterprises

If you would invest  31,974  in Valmont Industries on August 30, 2024 and sell it today you would earn a total of  3,240  from holding Valmont Industries or generate 10.13% return on investment over 90 days.

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

Valmont Industries  vs.  Beijing Enterprises Holdings

Valmont Industries

Risk-Adjusted Performance

13 of 100

Good

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

Beijing Enterprises

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Enterprises Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Beijing Enterprises reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Valmont Industries and Beijing Enterprises

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

The idea behind Valmont Industries and Beijing Enterprises Holdings 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.