Correlation Between Valero Energy and ENEOS Holdings

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

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

Diversification Opportunities for Valero Energy and ENEOS Holdings

0.36

Correlation Coefficient

Valero Energy  ENEOS Holdings

Weak diversification

The 3 months correlation between Valero and ENEOS is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Valero Energy and ENEOS Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENEOS Holdings and Valero Energy 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 Valero Energy are associated (or correlated) with ENEOS Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENEOS Holdings has no effect on the direction of Valero Energy i.e., Valero Energy and ENEOS Holdings go up and down completely randomly.

Pair Corralation between Valero Energy and ENEOS Holdings

Assuming the 90 days horizon Valero Energy is expected to under-perform the ENEOS Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Valero Energy is 1.18 times less risky than ENEOS Holdings. The stock trades about -0.56 of its potential returns per unit of risk. The ENEOS Holdings is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  492.00  in ENEOS Holdings on September 24, 2024 and sell it today you would lose (10.00) from holding ENEOS Holdings or give up 2.03% of portfolio value over 90 days.

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

Valero Energy  vs.  ENEOS Holdings

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. Despite nearly stable basic indicators, Valero Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ENEOS Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ENEOS Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ENEOS Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Valero Energy and ENEOS Holdings

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

The idea behind Valero Energy and ENEOS 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.