Correlation Between Valero Energy and Icahn Enterprises

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

By analyzing existing cross correlation between Valero Energy and Icahn Enterprises LP, you can compare the effects of market volatilities on Valero Energy and Icahn Enterprises 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 Icahn Enterprises. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valero Energy and Icahn Enterprises.

Diversification Opportunities for Valero Energy and Icahn Enterprises

-0.73

Correlation Coefficient

Valero Energy  Icahn Enterprises

Pay attention - limited upside

The 3 months correlation between Valero and Icahn is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Valero Energy and Icahn Enterprises LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icahn Enterprises 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 Icahn Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icahn Enterprises has no effect on the direction of Valero Energy i.e., Valero Energy and Icahn Enterprises go up and down completely randomly.

Pair Corralation between Valero Energy and Icahn Enterprises

Considering the 90-day investment horizon Valero Energy is expected to under-perform the Icahn Enterprises. In addition to that, Valero Energy is 1.49 times more volatile than Icahn Enterprises LP. It trades about -0.46 of its total potential returns per unit of risk. Icahn Enterprises LP is currently generating about 0.05 per unit of volatility. If you would invest  1,716  in Icahn Enterprises LP on February 5, 2024 and sell it today you would earn a total of  19.00  from holding Icahn Enterprises LP or generate 1.11% return on investment over 90 days.

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

Valero Energy  vs.  Icahn Enterprises LP

Valero Energy

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Valero Energy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady essential indicators, Valero Energy may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Icahn Enterprises

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Icahn Enterprises LP has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Icahn Enterprises is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Valero Energy and Icahn Enterprises

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

The idea behind Valero Energy and Icahn Enterprises LP 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.