Correlation Between Mairs Power and Value Line

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

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

Diversification Opportunities for Mairs Power and Value Line

0.92

Correlation Coefficient

Mairs Power  Value Line

Almost no diversification

The 3 months correlation between Mairs and Value is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Mairs Power Balanced and Value Line Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Line Asset and Mairs Power 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 Mairs Power Balanced are associated (or correlated) with Value Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Line Asset has no effect on the direction of Mairs Power i.e., Mairs Power and Value Line go up and down completely randomly.

Pair Corralation between Mairs Power and Value Line

Assuming the 90 days horizon Mairs Power Balanced is expected to generate 0.86 times more return on investment than Value Line. However, Mairs Power Balanced is 1.16 times less risky than Value Line. It trades about 0.06 of its potential returns per unit of risk. Value Line Asset is currently generating about 0.01 per unit of risk. If you would invest  11,042  in Mairs Power Balanced on September 15, 2024 and sell it today you would earn a total of  204.00  from holding Mairs Power Balanced or generate 1.85% return on investment over 90 days.

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

Mairs Power Balanced  vs.  Value Line Asset

Mairs Power Balanced

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mairs Power Balanced are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Mairs Power is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Value Line Asset

Risk-Adjusted Performance

1 of 100

Insignificant

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

Pair Trading with Mairs Power and Value Line

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

The idea behind Mairs Power Balanced and Value Line Asset 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.