Correlation Between Oracle and Vulcan Materials

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

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

Diversification Opportunities for Oracle and Vulcan Materials

0.84

Correlation Coefficient

Oracle  Vulcan Materials

Very poor diversification

The 3 months correlation between Oracle and Vulcan is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and Vulcan Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials and Oracle 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 Oracle 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 Oracle i.e., Oracle and Vulcan Materials go up and down completely randomly.

Pair Corralation between Oracle and Vulcan Materials

Assuming the 90 days trading horizon Oracle is expected to generate 1.58 times more return on investment than Vulcan Materials. However, Oracle is 1.58 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 -0.17 per unit of risk. If you would invest  17,584  in Oracle on December 24, 2024 and sell it today you would lose (2,884) from holding Oracle or give up 16.4% of portfolio value over 90 days.

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

Oracle  vs.  Vulcan Materials

Oracle

Risk-Adjusted Performance

Very Weak

Over the last 90 days Oracle has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain somewhat 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. Despite weak performance in the last few months, the Stock's primary indicators remain somewhat 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.

Pair Trading with Oracle and Vulcan Materials

The main advantage of trading using opposite Oracle and Vulcan Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oracle 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 Oracle 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.