Correlation Between Plastic Omnium and Vulcan Materials

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

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

Diversification Opportunities for Plastic Omnium and Vulcan Materials

0.04

Correlation Coefficient

Plastic Omnium  Vulcan Materials

Significant diversification

The 3 months correlation between Plastic and Vulcan is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Plastic Omnium and Vulcan Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials and Plastic Omnium 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 Plastic Omnium 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 Plastic Omnium i.e., Plastic Omnium and Vulcan Materials go up and down completely randomly.

Pair Corralation between Plastic Omnium and Vulcan Materials

Assuming the 90 days trading horizon Plastic Omnium is expected to under-perform the Vulcan Materials. In addition to that, Plastic Omnium is 1.46 times more volatile than Vulcan Materials. It trades about -0.01 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  15,843  in Vulcan Materials on October 13, 2024 and sell it today you would earn a total of  8,757  from holding Vulcan Materials or generate 55.27% return on investment over 90 days.

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

Plastic Omnium  vs.  Vulcan Materials

Plastic Omnium

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Plastic Omnium are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Plastic Omnium unveiled solid returns over the last few months and may actually be approaching a breakup point.

Vulcan Materials

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Vulcan Materials may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Plastic Omnium and Vulcan Materials

The main advantage of trading using opposite Plastic Omnium and Vulcan Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plastic Omnium 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 Plastic Omnium 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.