Correlation Between Eneos Holdings and Valero Energy

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

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

Diversification Opportunities for Eneos Holdings and Valero Energy

0.27

Correlation Coefficient

Eneos Holdings  Valero Energy

Modest diversification

The 3 months correlation between Eneos and Valero is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Eneos Holdings ADR and Valero Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valero Energy and Eneos Holdings 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 Eneos Holdings ADR are associated (or correlated) with Valero Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valero Energy has no effect on the direction of Eneos Holdings i.e., Eneos Holdings and Valero Energy go up and down completely randomly.

Pair Corralation between Eneos Holdings and Valero Energy

Assuming the 90 days horizon Eneos Holdings ADR is expected to generate 3.22 times more return on investment than Valero Energy. However, Eneos Holdings is 3.22 times more volatile than Valero Energy. It trades about 0.02 of its potential returns per unit of risk. Valero Energy is currently generating about -0.01 per unit of risk. If you would invest  1,047  in Eneos Holdings ADR on September 16, 2024 and sell it today you would lose (59.00) from holding Eneos Holdings ADR or give up 5.64% of portfolio value over 90 days.

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

Eneos Holdings ADR  vs.  Valero Energy

Eneos Holdings ADR

Risk-Adjusted Performance

1 of 100

Weak

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

Valero Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valero Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Valero Energy is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Eneos Holdings and Valero Energy

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

The idea behind Eneos Holdings ADR and Valero Energy 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.