Correlation Between Monarch Cement and Vulcan Materials

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

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

Diversification Opportunities for Monarch Cement and Vulcan Materials

-0.16

Correlation Coefficient

Monarch Cement  Vulcan Materials

Good diversification

The 3 months correlation between Monarch and Vulcan is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding The Monarch Cement and Vulcan Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials and Monarch Cement 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 The Monarch Cement 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 Monarch Cement i.e., Monarch Cement and Vulcan Materials go up and down completely randomly.

Pair Corralation between Monarch Cement and Vulcan Materials

Given the investment horizon of 90 days The Monarch Cement is expected to generate 0.67 times more return on investment than Vulcan Materials. However, The Monarch Cement is 1.49 times less risky than Vulcan Materials. It trades about 0.04 of its potential returns per unit of risk. Vulcan Materials is currently generating about -0.1 per unit of risk. If you would invest  21,731  in The Monarch Cement on December 28, 2024 and sell it today you would earn a total of  469.00  from holding The Monarch Cement or generate 2.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

The Monarch Cement  vs.  Vulcan Materials

Monarch Cement

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Monarch Cement are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Monarch Cement is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the 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 Monarch Cement and Vulcan Materials

The main advantage of trading using opposite Monarch Cement and Vulcan Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monarch Cement 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 The Monarch Cement 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.