Correlation Between Eternit SA and Vulcan Materials

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

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

Diversification Opportunities for Eternit SA and Vulcan Materials

0.13

Correlation Coefficient

Eternit SA  Vulcan Materials

Average diversification

The 3 months correlation between Eternit and Vulcan is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Eternit SA and Vulcan Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials and Eternit SA 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 Eternit SA 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 Eternit SA i.e., Eternit SA and Vulcan Materials go up and down completely randomly.

Pair Corralation between Eternit SA and Vulcan Materials

Assuming the 90 days trading horizon Eternit SA is expected to under-perform the Vulcan Materials. In addition to that, Eternit SA is 1.49 times more volatile than Vulcan Materials. It trades about -0.35 of its total potential returns per unit of risk. Vulcan Materials is currently generating about -0.43 per unit of volatility. If you would invest  2,916  in Vulcan Materials on October 11, 2024 and sell it today you would lose (362.00) from holding Vulcan Materials or give up 12.41% of portfolio value over 90 days.

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

Eternit SA  vs.  Vulcan Materials

Eternit SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eternit SA 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.

Vulcan Materials

Risk-Adjusted Performance

7 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain primary indicators, Vulcan Materials sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eternit SA and Vulcan Materials

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