Correlation Between Valhi and CJ Energy

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

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

Diversification Opportunities for Valhi and CJ Energy

0.0

Correlation Coefficient

Valhi  CJ Energy

Pay attention - limited upside

The 3 months correlation between Valhi and CJ Energy is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Valhi Inc and CJ Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CJ Energy Services and Valhi 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 Valhi Inc are associated (or correlated) with CJ Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CJ Energy Services has no effect on the direction of Valhi i.e., Valhi and CJ Energy go up and down completely randomly.

Pair Corralation between Valhi and CJ Energy

If you would invest (100.00) in CJ Energy Services on January 31, 2024 and sell it today you would earn a total of  100.00  from holding CJ Energy Services or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Valhi Inc  vs.  CJ Energy Services

Valhi Inc

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Valhi Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical indicators, Valhi demonstrated solid returns over the last few months and may actually be approaching a breakup point.

CJ Energy Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CJ Energy Services has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady forward-looking indicators, CJ Energy is not utilizing all of its potentials. The recent stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Valhi and CJ Energy

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

The idea behind Valhi Inc and CJ Energy Services 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.