Correlation Between MAG SILVER and Vulcan Materials

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

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

Diversification Opportunities for MAG SILVER and Vulcan Materials

0.3

Correlation Coefficient

MAG SILVER  Vulcan Materials

Weak diversification

The 3 months correlation between MAG and Vulcan is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding MAG SILVER and Vulcan Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials and MAG SILVER 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 MAG SILVER 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 MAG SILVER i.e., MAG SILVER and Vulcan Materials go up and down completely randomly.

Pair Corralation between MAG SILVER and Vulcan Materials

Assuming the 90 days trading horizon MAG SILVER is expected to generate 1.66 times more return on investment than Vulcan Materials. However, MAG SILVER is 1.66 times more volatile than Vulcan Materials. It trades about 0.08 of its potential returns per unit of risk. Vulcan Materials is currently generating about -0.15 per unit of risk. If you would invest  1,342  in MAG SILVER on December 20, 2024 and sell it today you would earn a total of  144.00  from holding MAG SILVER or generate 10.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

MAG SILVER  vs.  Vulcan Materials

MAG SILVER

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MAG SILVER are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, MAG SILVER unveiled 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. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with MAG SILVER and Vulcan Materials

The main advantage of trading using opposite MAG SILVER and Vulcan Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MAG SILVER 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 MAG SILVER 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.