Correlation Between Contango ORE and Vulcan Materials

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

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

Diversification Opportunities for Contango ORE and Vulcan Materials

-0.12

Correlation Coefficient

Contango ORE  Vulcan Materials

Good diversification

The 3 months correlation between Contango and Vulcan is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Contango ORE and Vulcan Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials and Contango ORE 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 Contango ORE 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 Contango ORE i.e., Contango ORE and Vulcan Materials go up and down completely randomly.

Pair Corralation between Contango ORE and Vulcan Materials

Given the investment horizon of 90 days Contango ORE is expected to under-perform the Vulcan Materials. In addition to that, Contango ORE is 2.8 times more volatile than Vulcan Materials. It trades about -0.03 of its total potential returns per unit of risk. Vulcan Materials is currently generating about 0.06 per unit of volatility. If you would invest  17,611  in Vulcan Materials on October 11, 2024 and sell it today you would earn a total of  7,917  from holding Vulcan Materials or generate 44.95% return on investment over 90 days.

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

Contango ORE  vs.  Vulcan Materials

Contango ORE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Contango ORE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Vulcan Materials

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Vulcan Materials is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Contango ORE and Vulcan Materials

The main advantage of trading using opposite Contango ORE and Vulcan Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Contango ORE 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 Contango ORE 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.