Correlation Between Vulcan Materials and Scandic Hotels

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

Diversification Opportunities for Vulcan Materials and Scandic Hotels

-0.45

Correlation Coefficient

Vulcan Materials  Scandic Hotels

Very good diversification

The 3 months correlation between Vulcan and Scandic is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials Co and Scandic Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandic Hotels Group 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 Scandic Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandic Hotels Group has no effect on the direction of Vulcan Materials i.e., Vulcan Materials and Scandic Hotels go up and down completely randomly.

Pair Corralation between Vulcan Materials and Scandic Hotels

Assuming the 90 days trading horizon Vulcan Materials is expected to generate 1.8 times less return on investment than Scandic Hotels. In addition to that, Vulcan Materials is 1.05 times more volatile than Scandic Hotels Group. It trades about 0.12 of its total potential returns per unit of risk. Scandic Hotels Group is currently generating about 0.23 per unit of volatility. If you would invest  6,815  in Scandic Hotels Group on October 26, 2024 and sell it today you would earn a total of  460.00  from holding Scandic Hotels Group or generate 6.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Vulcan Materials Co  vs.  Scandic Hotels Group

Vulcan Materials

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Vulcan Materials may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Scandic Hotels Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Scandic Hotels Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Scandic Hotels 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 Scandic Hotels

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

The idea behind Vulcan Materials Co and Scandic Hotels Group 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.