Correlation Between Materialise and Vulcan Materials

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

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

Diversification Opportunities for Materialise and Vulcan Materials

0.83

Correlation Coefficient

Materialise  Vulcan Materials

Very poor diversification

The 3 months correlation between Materialise and Vulcan is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Materialise NV and Vulcan Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials and Materialise 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 Materialise NV are associated (or correlated) with Vulcan Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Materials has no effect on the direction of Materialise i.e., Materialise and Vulcan Materials go up and down completely randomly.

Pair Corralation between Materialise and Vulcan Materials

Assuming the 90 days trading horizon Materialise NV is expected to generate 2.38 times more return on investment than Vulcan Materials. However, Materialise is 2.38 times more volatile than Vulcan Materials. It trades about 0.2 of its potential returns per unit of risk. Vulcan Materials is currently generating about 0.13 per unit of risk. If you would invest  456.00  in Materialise NV on October 8, 2024 and sell it today you would earn a total of  289.00  from holding Materialise NV or generate 63.38% return on investment over 90 days.

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

Materialise NV  vs.  Vulcan Materials

Materialise NV

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Materialise NV are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Materialise unveiled solid returns over the last few months and may actually be approaching a breakup point.

Vulcan Materials

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Vulcan Materials reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Materialise and Vulcan Materials

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

The idea behind Materialise NV and Vulcan Materials 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.