Correlation Between Vulcan Materials and Axon Enterprise

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

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

Diversification Opportunities for Vulcan Materials and Axon Enterprise

0.86

Correlation Coefficient

Vulcan Materials  Axon Enterprise

Very poor diversification

The 3 months correlation between Vulcan and Axon is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials Co and Axon Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axon Enterprise and Vulcan Materials 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 Vulcan Materials Co are associated (or correlated) with Axon Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axon Enterprise has no effect on the direction of Vulcan Materials i.e., Vulcan Materials and Axon Enterprise go up and down completely randomly.

Pair Corralation between Vulcan Materials and Axon Enterprise

Assuming the 90 days trading horizon Vulcan Materials is expected to generate 7.4 times less return on investment than Axon Enterprise. But when comparing it to its historical volatility, Vulcan Materials Co is 3.35 times less risky than Axon Enterprise. It trades about 0.15 of its potential returns per unit of risk. Axon Enterprise is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  43,500  in Axon Enterprise on September 5, 2024 and sell it today you would earn a total of  22,661  from holding Axon Enterprise or generate 52.09% return on investment over 90 days.

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

Vulcan Materials Co  vs.  Axon Enterprise

Vulcan Materials

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials Co are ranked lower than 15 (%) 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.

Axon Enterprise

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Axon Enterprise are ranked lower than 20 (%) 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.

Pair Trading with Vulcan Materials and Axon Enterprise

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

The idea behind Vulcan Materials Co and Axon Enterprise 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.