Correlation Between Bank of America and Vulcan Materials

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

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

Diversification Opportunities for Bank of America and Vulcan Materials

0.55

Correlation Coefficient

Bank of America  Vulcan Materials

Very weak diversification

The 3 months correlation between Bank and Vulcan is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Vulcan Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials and Bank of America 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 Bank of America 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 Bank of America i.e., Bank of America and Vulcan Materials go up and down completely randomly.

Pair Corralation between Bank of America and Vulcan Materials

Considering the 90-day investment horizon Bank of America is expected to generate 0.98 times more return on investment than Vulcan Materials. However, Bank of America is 1.02 times less risky than Vulcan Materials. It trades about 0.08 of its potential returns per unit of risk. Vulcan Materials Co is currently generating about 0.06 per unit of risk. If you would invest  2,714  in Bank of America on November 30, 2024 and sell it today you would earn a total of  1,896  from holding Bank of America or generate 69.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.18%
Values	Daily Returns

Bank of America  vs.  Vulcan Materials Co

Bank of America

Risk-Adjusted Performance

Very Weak

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

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 unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Bank of America and Vulcan Materials

The main advantage of trading using opposite Bank of America and Vulcan Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America 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 Bank of America 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.