Correlation Between Vulcan Materials and Canadian General

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

Diversification Opportunities for Vulcan Materials and Canadian General

0.8

Correlation Coefficient

Vulcan Materials  Canadian General

Very poor diversification

The 3 months correlation between Vulcan and Canadian is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials Co and Canadian General Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian General Inv 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 Canadian General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian General Inv has no effect on the direction of Vulcan Materials i.e., Vulcan Materials and Canadian General go up and down completely randomly.

Pair Corralation between Vulcan Materials and Canadian General

Assuming the 90 days trading horizon Vulcan Materials Co is expected to generate 0.97 times more return on investment than Canadian General. However, Vulcan Materials Co is 1.03 times less risky than Canadian General. It trades about -0.09 of its potential returns per unit of risk. Canadian General Investments is currently generating about -0.1 per unit of risk. If you would invest  26,244  in Vulcan Materials Co on December 23, 2024 and sell it today you would lose (2,722) from holding Vulcan Materials Co or give up 10.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Vulcan Materials Co  vs.  Canadian General Investments

Vulcan Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vulcan Materials Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Canadian General Inv

Risk-Adjusted Performance

Very Weak

Over the last 90 days Canadian General Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Vulcan Materials and Canadian General

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

The idea behind Vulcan Materials Co and Canadian General Investments 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.