Correlation Between Office Properties and Vulcan Materials

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

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

Diversification Opportunities for Office Properties and Vulcan Materials

0.83

Correlation Coefficient

Office Properties  Vulcan Materials

Very poor diversification

The 3 months correlation between Office and Vulcan is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Office Properties Income and Vulcan Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials and Office Properties 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 Office Properties Income 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 Office Properties i.e., Office Properties and Vulcan Materials go up and down completely randomly.

Pair Corralation between Office Properties and Vulcan Materials

Assuming the 90 days horizon Office Properties Income is expected to under-perform the Vulcan Materials. In addition to that, Office Properties is 1.81 times more volatile than Vulcan Materials. It trades about -0.08 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  26,034  in Vulcan Materials on December 19, 2024 and sell it today you would lose (2,384) from holding Vulcan Materials or give up 9.16% of portfolio value over 90 days.

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

Office Properties Income  vs.  Vulcan Materials

Office Properties Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Office Properties Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional 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 Office Properties and Vulcan Materials

The main advantage of trading using opposite Office Properties and Vulcan Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Office Properties 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 Office Properties Income 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.