Correlation Between Axon Enterprise and Vulcan Materials

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

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

Diversification Opportunities for Axon Enterprise and Vulcan Materials

0.84

Correlation Coefficient

Axon Enterprise  Vulcan Materials

Very poor diversification

The 3 months correlation between Axon and Vulcan is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Axon Enterprise and Vulcan Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials and Axon Enterprise 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 Axon Enterprise 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 Axon Enterprise i.e., Axon Enterprise and Vulcan Materials go up and down completely randomly.

Pair Corralation between Axon Enterprise and Vulcan Materials

Assuming the 90 days trading horizon Axon Enterprise is expected to generate 2.32 times more return on investment than Vulcan Materials. However, Axon Enterprise is 2.32 times more volatile than Vulcan Materials Co. It trades about 0.23 of its potential returns per unit of risk. Vulcan Materials Co is currently generating about 0.15 per unit of risk. If you would invest  38,351  in Axon Enterprise on September 13, 2024 and sell it today you would earn a total of  26,147  from holding Axon Enterprise or generate 68.18% return on investment over 90 days.

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

Axon Enterprise  vs.  Vulcan Materials Co

Axon Enterprise

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Axon Enterprise are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Axon Enterprise unveiled solid returns over the last few months and may actually be approaching a breakup point.

Vulcan Materials

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Vulcan Materials unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Axon Enterprise and Vulcan Materials

The main advantage of trading using opposite Axon Enterprise and Vulcan Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Axon Enterprise 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 Axon Enterprise and Vulcan Materials Co 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.