Correlation Between Primary Health and Vulcan Materials

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

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

Diversification Opportunities for Primary Health and Vulcan Materials

-0.54

Correlation Coefficient

Primary Health  Vulcan Materials

Excellent diversification

The 3 months correlation between Primary and Vulcan is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Primary Health Properties and Vulcan Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials and Primary Health 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 Primary Health Properties 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 Primary Health i.e., Primary Health and Vulcan Materials go up and down completely randomly.

Pair Corralation between Primary Health and Vulcan Materials

Assuming the 90 days trading horizon Primary Health is expected to generate 1.49 times less return on investment than Vulcan Materials. But when comparing it to its historical volatility, Primary Health Properties is 1.44 times less risky than Vulcan Materials. It trades about 0.02 of its potential returns per unit of risk. Vulcan Materials Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  24,147  in Vulcan Materials Co on October 7, 2024 and sell it today you would earn a total of  1,563  from holding Vulcan Materials Co or generate 6.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.56%
Values	Daily Returns

Primary Health Properties  vs.  Vulcan Materials Co

Primary Health Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Primary Health Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Vulcan Materials

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Vulcan Materials may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Primary Health and Vulcan Materials

The main advantage of trading using opposite Primary Health and Vulcan Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Primary Health 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 Primary Health Properties and Vulcan Materials Co 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 Commodity Directory module to find actively traded commodities issued by global exchanges.