Correlation Between Huntsman and Valhi

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

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

Diversification Opportunities for Huntsman and Valhi

0.52

Correlation Coefficient

Huntsman  Valhi

Very weak diversification

The 3 months correlation between Huntsman and Valhi is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Huntsman and Valhi Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valhi Inc and Huntsman 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 Huntsman are associated (or correlated) with Valhi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valhi Inc has no effect on the direction of Huntsman i.e., Huntsman and Valhi go up and down completely randomly.

Pair Corralation between Huntsman and Valhi

Considering the 90-day investment horizon Huntsman is expected to under-perform the Valhi. But the stock apears to be less risky and, when comparing its historical volatility, Huntsman is 2.88 times less risky than Valhi. The stock trades about -0.08 of its potential returns per unit of risk. The Valhi Inc is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,913  in Valhi Inc on August 30, 2024 and sell it today you would lose (298.00) from holding Valhi Inc or give up 10.23% of portfolio value over 90 days.

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

Huntsman  vs.  Valhi Inc

Huntsman

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huntsman has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Valhi Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valhi Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Valhi is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Huntsman and Valhi

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

The idea behind Huntsman and Valhi 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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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.