Correlation Between 14575EAA3 and Vulcan Materials

Can any of the company-specific risk be diversified away by investing in both 14575EAA3 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 14575EAA3 and Vulcan Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between US14575EAA38 and Vulcan Materials, you can compare the effects of market volatilities on 14575EAA3 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 14575EAA3 with a short position of Vulcan Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of 14575EAA3 and Vulcan Materials.

Diversification Opportunities for 14575EAA3 and Vulcan Materials

0.34

Correlation Coefficient

14575EAA3  Vulcan Materials

Weak diversification

The 3 months correlation between 14575EAA3 and Vulcan is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding US14575EAA38 and Vulcan Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials and 14575EAA3 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 US14575EAA38 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 14575EAA3 i.e., 14575EAA3 and Vulcan Materials go up and down completely randomly.

Pair Corralation between 14575EAA3 and Vulcan Materials

Assuming the 90 days trading horizon US14575EAA38 is expected to generate 0.24 times more return on investment than Vulcan Materials. However, US14575EAA38 is 4.09 times less risky than Vulcan Materials. It trades about -0.05 of its potential returns per unit of risk. Vulcan Materials is currently generating about -0.11 per unit of risk. If you would invest  9,937  in US14575EAA38 on December 25, 2024 and sell it today you would lose (87.00) from holding US14575EAA38 or give up 0.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	74.58%
Values	Daily Returns

US14575EAA38  vs.  Vulcan Materials

US14575EAA38

Risk-Adjusted Performance

Very Weak

Over the last 90 days US14575EAA38 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 14575EAA3 is not utilizing all of its potentials. The newest stock price disturbance, 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 14575EAA3 and Vulcan Materials

The main advantage of trading using opposite 14575EAA3 and Vulcan Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 14575EAA3 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 US14575EAA38 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.