Correlation Between Vulcan Materials and Roper Technologies

Can any of the company-specific risk be diversified away by investing in both Vulcan Materials and Roper Technologies 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 Roper Technologies 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 Roper Technologies, you can compare the effects of market volatilities on Vulcan Materials and Roper Technologies 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 Roper Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vulcan Materials and Roper Technologies.

Diversification Opportunities for Vulcan Materials and Roper Technologies

0.47

Correlation Coefficient

Vulcan Materials  Roper Technologies

Very weak diversification

The 3 months correlation between Vulcan and Roper is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials Co and Roper Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roper Technologies 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 Roper Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roper Technologies has no effect on the direction of Vulcan Materials i.e., Vulcan Materials and Roper Technologies go up and down completely randomly.

Pair Corralation between Vulcan Materials and Roper Technologies

Assuming the 90 days trading horizon Vulcan Materials is expected to generate 1.66 times less return on investment than Roper Technologies. But when comparing it to its historical volatility, Vulcan Materials Co is 3.57 times less risky than Roper Technologies. It trades about 0.06 of its potential returns per unit of risk. Roper Technologies is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  43,416  in Roper Technologies on September 26, 2024 and sell it today you would earn a total of  9,251  from holding Roper Technologies or generate 21.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.58%
Values	Daily Returns

Vulcan Materials Co  vs.  Roper Technologies

Vulcan Materials

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Vulcan Materials is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Roper Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Roper Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Roper Technologies is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vulcan Materials and Roper Technologies

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

The idea behind Vulcan Materials Co and Roper Technologies 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..