Correlation Between Vulcan Materials and Check Point

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

Diversification Opportunities for Vulcan Materials and Check Point

-0.58

Correlation Coefficient

Vulcan Materials  Check Point

Excellent diversification

The 3 months correlation between Vulcan and Check is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials Co and Check Point Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Check Point Software 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 Check Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Check Point Software has no effect on the direction of Vulcan Materials i.e., Vulcan Materials and Check Point go up and down completely randomly.

Pair Corralation between Vulcan Materials and Check Point

Assuming the 90 days trading horizon Vulcan Materials Co is expected to generate 0.81 times more return on investment than Check Point. However, Vulcan Materials Co is 1.23 times less risky than Check Point. It trades about 0.15 of its potential returns per unit of risk. Check Point Software is currently generating about -0.02 per unit of risk. If you would invest  24,457  in Vulcan Materials Co on September 2, 2024 and sell it today you would earn a total of  4,329  from holding Vulcan Materials Co or generate 17.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.97%
Values	Daily Returns

Vulcan Materials Co  vs.  Check Point Software

Vulcan Materials

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials Co are ranked lower than 11 (%) 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.

Check Point Software

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Vulcan Materials and Check Point

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

The idea behind Vulcan Materials Co and Check Point Software 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.