Correlation Between Valaris and MRC Global

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

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

Diversification Opportunities for Valaris and MRC Global

-0.6

Correlation Coefficient

Valaris  MRC Global

Excellent diversification

The 3 months correlation between Valaris and MRC is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Valaris and MRC Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MRC Global and Valaris 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 Valaris are associated (or correlated) with MRC Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MRC Global has no effect on the direction of Valaris i.e., Valaris and MRC Global go up and down completely randomly.

Pair Corralation between Valaris and MRC Global

Considering the 90-day investment horizon Valaris is expected to under-perform the MRC Global. In addition to that, Valaris is 1.01 times more volatile than MRC Global. It trades about -0.02 of its total potential returns per unit of risk. MRC Global is currently generating about 0.02 per unit of volatility. If you would invest  1,174  in MRC Global on September 14, 2024 and sell it today you would earn a total of  142.00  from holding MRC Global or generate 12.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Valaris  vs.  MRC Global

Valaris

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valaris has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

MRC Global

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MRC Global are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, MRC Global may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Valaris and MRC Global

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

The idea behind Valaris and MRC Global 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.