Correlation Between Holcim and Vulcan Materials

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

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

Diversification Opportunities for Holcim and Vulcan Materials

-0.78

Correlation Coefficient

Holcim  Vulcan Materials

Pay attention - limited upside

The 3 months correlation between Holcim and Vulcan is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Holcim and Vulcan Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials and Holcim 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 Holcim 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 Holcim i.e., Holcim and Vulcan Materials go up and down completely randomly.

Pair Corralation between Holcim and Vulcan Materials

Assuming the 90 days horizon Holcim is expected to generate 1.19 times more return on investment than Vulcan Materials. However, Holcim is 1.19 times more volatile than Vulcan Materials. It trades about 0.12 of its potential returns per unit of risk. Vulcan Materials is currently generating about -0.1 per unit of risk. If you would invest  9,785  in Holcim on December 28, 2024 and sell it today you would earn a total of  1,399  from holding Holcim or generate 14.3% return on investment over 90 days.

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

Holcim  vs.  Vulcan Materials

Holcim

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Holcim are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Holcim reported solid returns over the last few months and may actually be approaching a breakup point.

Vulcan Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vulcan Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Holcim and Vulcan Materials

The main advantage of trading using opposite Holcim and Vulcan Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Holcim 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 Holcim 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.

Check out your portfolio center.

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.