Correlation Between Vulcan Materials and Rockfire Resources

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

Diversification Opportunities for Vulcan Materials and Rockfire Resources

-0.34

Correlation Coefficient

Vulcan Materials  Rockfire Resources

Very good diversification

The 3 months correlation between Vulcan and Rockfire is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials Co and Rockfire Resources plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rockfire Resources 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 Rockfire Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rockfire Resources plc has no effect on the direction of Vulcan Materials i.e., Vulcan Materials and Rockfire Resources go up and down completely randomly.

Pair Corralation between Vulcan Materials and Rockfire Resources

Assuming the 90 days trading horizon Vulcan Materials is expected to generate 9.63 times less return on investment than Rockfire Resources. But when comparing it to its historical volatility, Vulcan Materials Co is 7.38 times less risky than Rockfire Resources. It trades about 0.07 of its potential returns per unit of risk. Rockfire Resources plc is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Rockfire Resources plc on October 23, 2024 and sell it today you would earn a total of  5.00  from holding Rockfire Resources plc or generate 45.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Vulcan Materials Co  vs.  Rockfire Resources plc

Vulcan Materials

Risk-Adjusted Performance

5 of 100

Modest

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.

Rockfire Resources plc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rockfire Resources plc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Rockfire Resources unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vulcan Materials and Rockfire Resources

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

The idea behind Vulcan Materials Co and Rockfire Resources 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.