Correlation Between Steel Partners and Valmont Industries

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

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

Diversification Opportunities for Steel Partners and Valmont Industries

-0.03

Correlation Coefficient

Steel Partners  Valmont Industries

Good diversification

The 3 months correlation between Steel and Valmont is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Steel Partners Holdings and Valmont Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valmont Industries and Steel Partners 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 Steel Partners Holdings are associated (or correlated) with Valmont Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valmont Industries has no effect on the direction of Steel Partners i.e., Steel Partners and Valmont Industries go up and down completely randomly.

Pair Corralation between Steel Partners and Valmont Industries

Given the investment horizon of 90 days Steel Partners Holdings is expected to under-perform the Valmont Industries. But the stock apears to be less risky and, when comparing its historical volatility, Steel Partners Holdings is 1.41 times less risky than Valmont Industries. The stock trades about -0.02 of its potential returns per unit of risk. The Valmont Industries is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  22,521  in Valmont Industries on February 4, 2024 and sell it today you would earn a total of  2,100  from holding Valmont Industries or generate 9.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Steel Partners Holdings  vs.  Valmont Industries

Steel Partners Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Steel Partners Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable essential indicators, Steel Partners is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Valmont Industries

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Valmont Industries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak primary indicators, Valmont Industries may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Steel Partners and Valmont Industries

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

The idea behind Steel Partners Holdings and Valmont Industries 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.