Correlation Between MA Financial and Vulcan Steel

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

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

Diversification Opportunities for MA Financial and Vulcan Steel

0.08

Correlation Coefficient

MA Financial  Vulcan Steel

Significant diversification

The 3 months correlation between MAF and Vulcan is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding MA Financial Group and Vulcan Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Steel and MA Financial 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 MA Financial Group are associated (or correlated) with Vulcan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Steel has no effect on the direction of MA Financial i.e., MA Financial and Vulcan Steel go up and down completely randomly.

Pair Corralation between MA Financial and Vulcan Steel

Assuming the 90 days trading horizon MA Financial Group is expected to under-perform the Vulcan Steel. But the stock apears to be less risky and, when comparing its historical volatility, MA Financial Group is 1.39 times less risky than Vulcan Steel. The stock trades about -0.13 of its potential returns per unit of risk. The Vulcan Steel is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  702.00  in Vulcan Steel on September 26, 2024 and sell it today you would earn a total of  61.00  from holding Vulcan Steel or generate 8.69% return on investment over 90 days.

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

MA Financial Group  vs.  Vulcan Steel

MA Financial Group

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MA Financial Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, MA Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vulcan Steel

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Steel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Vulcan Steel 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 MA Financial and Vulcan Steel

The main advantage of trading using opposite MA Financial and Vulcan Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MA Financial position performs unexpectedly, Vulcan Steel 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 Steel will offset losses from the drop in Vulcan Steel's long position.

The idea behind MA Financial Group and Vulcan Steel 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.