Correlation Between Vulcan Materials and Optima Health

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

Diversification Opportunities for Vulcan Materials and Optima Health

-0.64

Correlation Coefficient

Vulcan Materials  Optima Health

Excellent diversification

The 3 months correlation between Vulcan and Optima is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials Co and Optima Health plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optima Health plc 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 Optima Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optima Health plc has no effect on the direction of Vulcan Materials i.e., Vulcan Materials and Optima Health go up and down completely randomly.

Pair Corralation between Vulcan Materials and Optima Health

Assuming the 90 days trading horizon Vulcan Materials Co is expected to under-perform the Optima Health. In addition to that, Vulcan Materials is 1.03 times more volatile than Optima Health plc. It trades about -0.08 of its total potential returns per unit of risk. Optima Health plc is currently generating about 0.17 per unit of volatility. If you would invest  14,200  in Optima Health plc on December 30, 2024 and sell it today you would earn a total of  2,900  from holding Optima Health plc or generate 20.42% return on investment over 90 days.

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

Vulcan Materials Co  vs.  Optima Health plc

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 unsteady 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.

Optima Health plc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Optima Health plc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Optima Health exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vulcan Materials and Optima Health

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

The idea behind Vulcan Materials Co and Optima Health plc 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.