Correlation Between Vulcan Materials and Software Circle

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

Diversification Opportunities for Vulcan Materials and Software Circle

-0.25

Correlation Coefficient

Vulcan Materials  Software Circle

Very good diversification

The 3 months correlation between Vulcan and Software is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials Co and Software Circle plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Software Circle 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 Software Circle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Software Circle plc has no effect on the direction of Vulcan Materials i.e., Vulcan Materials and Software Circle go up and down completely randomly.

Pair Corralation between Vulcan Materials and Software Circle

Assuming the 90 days trading horizon Vulcan Materials is expected to generate 2.15 times less return on investment than Software Circle. In addition to that, Vulcan Materials is 1.46 times more volatile than Software Circle plc. It trades about 0.14 of its total potential returns per unit of risk. Software Circle plc is currently generating about 0.42 per unit of volatility. If you would invest  2,300  in Software Circle plc on October 25, 2024 and sell it today you would earn a total of  200.00  from holding Software Circle plc or generate 8.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Vulcan Materials Co  vs.  Software Circle plc

Vulcan Materials

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials Co are ranked lower than 4 (%) 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.

Software Circle plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Software Circle plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Software Circle is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vulcan Materials and Software Circle

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

The idea behind Vulcan Materials Co and Software Circle 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.