Correlation Between Anhui Conch and Vulcan Materials

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

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

Diversification Opportunities for Anhui Conch and Vulcan Materials

0.14

Correlation Coefficient

Anhui Conch  Vulcan Materials

Average diversification

The 3 months correlation between Anhui and Vulcan is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Conch Cement and Vulcan Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials and Anhui Conch 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 Anhui Conch Cement 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 Anhui Conch i.e., Anhui Conch and Vulcan Materials go up and down completely randomly.

Pair Corralation between Anhui Conch and Vulcan Materials

Assuming the 90 days horizon Anhui Conch Cement is expected to generate 3.63 times more return on investment than Vulcan Materials. However, Anhui Conch is 3.63 times more volatile than Vulcan Materials. It trades about 0.02 of its potential returns per unit of risk. Vulcan Materials is currently generating about 0.07 per unit of risk. If you would invest  313.00  in Anhui Conch Cement on September 13, 2024 and sell it today you would lose (29.00) from holding Anhui Conch Cement or give up 9.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.74%
Values	Daily Returns

Anhui Conch Cement  vs.  Vulcan Materials

Anhui Conch Cement

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Conch Cement are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, Anhui Conch reported 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 are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, Vulcan Materials exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Anhui Conch and Vulcan Materials

The main advantage of trading using opposite Anhui Conch and Vulcan Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anhui Conch 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 Anhui Conch Cement and Vulcan Materials 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.