Correlation Between Las Vegas and Vulcan Materials

Can any of the company-specific risk be diversified away by investing in both Las Vegas and Vulcan Materials 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 Las Vegas and Vulcan Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Las Vegas Sands and Vulcan Materials Co, you can compare the effects of market volatilities on Las Vegas and Vulcan Materials 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 Las Vegas with a short position of Vulcan Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Las Vegas and Vulcan Materials.

Diversification Opportunities for Las Vegas and Vulcan Materials

0.45

Correlation Coefficient

Las Vegas  Vulcan Materials

Very weak diversification

The 3 months correlation between Las and Vulcan is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Las Vegas Sands and Vulcan Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials and Las Vegas 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 Las Vegas Sands are associated (or correlated) with Vulcan Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Materials has no effect on the direction of Las Vegas i.e., Las Vegas and Vulcan Materials go up and down completely randomly.

Pair Corralation between Las Vegas and Vulcan Materials

Assuming the 90 days trading horizon Las Vegas Sands is expected to generate 1.2 times more return on investment than Vulcan Materials. However, Las Vegas is 1.2 times more volatile than Vulcan Materials Co. It trades about 0.26 of its potential returns per unit of risk. Vulcan Materials Co is currently generating about 0.15 per unit of risk. If you would invest  3,997  in Las Vegas Sands on September 13, 2024 and sell it today you would earn a total of  1,500  from holding Las Vegas Sands or generate 37.53% return on investment over 90 days.

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

Las Vegas Sands  vs.  Vulcan Materials Co

Las Vegas Sands

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Las Vegas Sands are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Las Vegas unveiled solid returns over the last few months and may actually be approaching a breakup point.

Vulcan Materials

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials Co are ranked lower than 12 (%) 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.

Pair Trading with Las Vegas and Vulcan Materials

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

The idea behind Las Vegas Sands and Vulcan Materials Co 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.