Correlation Between Valvoline and Mannatech Incorporated

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

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

Diversification Opportunities for Valvoline and Mannatech Incorporated

-0.22

Correlation Coefficient

Valvoline  Mannatech Incorporated

Very good diversification

The 3 months correlation between Valvoline and Mannatech is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Valvoline and Mannatech Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mannatech Incorporated and Valvoline 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 Valvoline are associated (or correlated) with Mannatech Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mannatech Incorporated has no effect on the direction of Valvoline i.e., Valvoline and Mannatech Incorporated go up and down completely randomly.

Pair Corralation between Valvoline and Mannatech Incorporated

Considering the 90-day investment horizon Valvoline is expected to generate 0.44 times more return on investment than Mannatech Incorporated. However, Valvoline is 2.3 times less risky than Mannatech Incorporated. It trades about -0.15 of its potential returns per unit of risk. Mannatech Incorporated is currently generating about -0.08 per unit of risk. If you would invest  4,457  in Valvoline on January 28, 2024 and sell it today you would lose (171.00) from holding Valvoline or give up 3.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	77.27%
Values	Daily Returns

Valvoline  vs.  Mannatech Incorporated

Valvoline

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Valvoline are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Valvoline showed solid returns over the last few months and may actually be approaching a breakup point.

Mannatech Incorporated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mannatech Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly 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 the company investors.

Pair Trading with Valvoline and Mannatech Incorporated

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

The idea behind Valvoline and Mannatech Incorporated 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.