Correlation Between Canadian General and Vulcan Materials

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

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

Diversification Opportunities for Canadian General and Vulcan Materials

0.8

Correlation Coefficient

Canadian General  Vulcan Materials

Very poor diversification

The 3 months correlation between Canadian and Vulcan is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Canadian General Investments and Vulcan Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials and Canadian General 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 Canadian General Investments 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 Canadian General i.e., Canadian General and Vulcan Materials go up and down completely randomly.

Pair Corralation between Canadian General and Vulcan Materials

Assuming the 90 days trading horizon Canadian General Investments is expected to under-perform the Vulcan Materials. In addition to that, Canadian General is 1.03 times more volatile than Vulcan Materials Co. It trades about -0.1 of its total potential returns per unit of risk. Vulcan Materials Co is currently generating about -0.09 per unit of volatility. If you would invest  26,244  in Vulcan Materials Co on December 23, 2024 and sell it today you would lose (2,722) from holding Vulcan Materials Co or give up 10.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Canadian General Investments  vs.  Vulcan Materials Co

Canadian General Inv

Risk-Adjusted Performance

Very Weak

Over the last 90 days Canadian General Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm 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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Canadian General and Vulcan Materials

The main advantage of trading using opposite Canadian General and Vulcan Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian General 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 Canadian General Investments 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.