Correlation Between Empire Metals and Vulcan Materials

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

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

Diversification Opportunities for Empire Metals and Vulcan Materials

-0.79

Correlation Coefficient

Empire Metals  Vulcan Materials

Pay attention - limited upside

The 3 months correlation between Empire and Vulcan is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Empire Metals Limited and Vulcan Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials and Empire Metals 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 Empire Metals Limited 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 Empire Metals i.e., Empire Metals and Vulcan Materials go up and down completely randomly.

Pair Corralation between Empire Metals and Vulcan Materials

Assuming the 90 days trading horizon Empire Metals Limited is expected to generate 3.77 times more return on investment than Vulcan Materials. However, Empire Metals is 3.77 times more volatile than Vulcan Materials Co. 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  175.00  in Empire Metals Limited on October 15, 2024 and sell it today you would earn a total of  560.00  from holding Empire Metals Limited or generate 320.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Empire Metals Limited  vs.  Vulcan Materials Co

Empire Metals Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Empire Metals Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Empire Metals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Vulcan Materials

Risk-Adjusted Performance

0 of 100

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 comparatively stable basic indicators, Vulcan Materials is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Empire Metals and Vulcan Materials

The main advantage of trading using opposite Empire Metals and Vulcan Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire Metals 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 Empire Metals Limited 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.