Correlation Between Valvoline and ATRenew

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

By analyzing existing cross correlation between Valvoline and ATRenew Inc DRC, you can compare the effects of market volatilities on Valvoline and ATRenew 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 ATRenew. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valvoline and ATRenew.

Diversification Opportunities for Valvoline and ATRenew

0.64

Correlation Coefficient

Valvoline  ATRenew

Poor diversification

The 3 months correlation between Valvoline and ATRenew is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Valvoline and ATRenew Inc DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATRenew Inc DRC 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 ATRenew. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATRenew Inc DRC has no effect on the direction of Valvoline i.e., Valvoline and ATRenew go up and down completely randomly.

Pair Corralation between Valvoline and ATRenew

Considering the 90-day investment horizon Valvoline is expected to under-perform the ATRenew. But the stock apears to be less risky and, when comparing its historical volatility, Valvoline is 5.1 times less risky than ATRenew. The stock trades about -0.17 of its potential returns per unit of risk. The ATRenew Inc DRC is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  184.00  in ATRenew Inc DRC on January 29, 2024 and sell it today you would earn a total of  14.00  from holding ATRenew Inc DRC or generate 7.61% return on investment over 90 days.

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

Valvoline  vs.  ATRenew Inc DRC

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.

ATRenew Inc DRC

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ATRenew Inc DRC are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, ATRenew exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Valvoline and ATRenew

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

The idea behind Valvoline and ATRenew Inc DRC 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.