Correlation Between James Hardie and Vulcan Materials

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

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

Diversification Opportunities for James Hardie and Vulcan Materials

0.54

Correlation Coefficient

James Hardie  Vulcan Materials

Very weak diversification

The 3 months correlation between James and Vulcan is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding James Hardie Industries and Vulcan Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials and James Hardie 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 James Hardie Industries 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 James Hardie i.e., James Hardie and Vulcan Materials go up and down completely randomly.

Pair Corralation between James Hardie and Vulcan Materials

Considering the 90-day investment horizon James Hardie Industries is expected to under-perform the Vulcan Materials. In addition to that, James Hardie is 1.76 times more volatile than Vulcan Materials. It trades about -0.14 of its total potential returns per unit of risk. Vulcan Materials is currently generating about -0.09 per unit of volatility. If you would invest  26,178  in Vulcan Materials on December 27, 2024 and sell it today you would lose (2,472) from holding Vulcan Materials or give up 9.44% of portfolio value over 90 days.

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

James Hardie Industries  vs.  Vulcan Materials

James Hardie Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days James Hardie Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 James Hardie and Vulcan Materials

The main advantage of trading using opposite James Hardie and Vulcan Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if James Hardie 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 James Hardie Industries 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.