Correlation Between Liberty and Valero Energy

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

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

Diversification Opportunities for Liberty and Valero Energy

-0.06

Correlation Coefficient

Liberty  Valero Energy

Good diversification

The 3 months correlation between Liberty and Valero is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Interactive LLC and Valero Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valero Energy and Liberty 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 Liberty Interactive LLC 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 Liberty i.e., Liberty and Valero Energy go up and down completely randomly.

Pair Corralation between Liberty and Valero Energy

Assuming the 90 days trading horizon Liberty Interactive LLC is expected to under-perform the Valero Energy. In addition to that, Liberty is 5.45 times more volatile than Valero Energy. It trades about -0.23 of its total potential returns per unit of risk. Valero Energy is currently generating about -0.09 per unit of volatility. If you would invest  17,069  in Valero Energy on January 28, 2024 and sell it today you would lose (489.00) from holding Valero Energy or give up 2.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Liberty Interactive LLC  vs.  Valero Energy

Liberty Interactive LLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liberty Interactive LLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for Liberty Interactive LLC investors.

Valero Energy

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Valero Energy are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting essential indicators, Valero Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Liberty and Valero Energy

The main advantage of trading using opposite Liberty and Valero Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liberty 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 Liberty Interactive LLC 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.