Correlation Between Vulcan Materials and Airbnb

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

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

Diversification Opportunities for Vulcan Materials and Airbnb

0.84

Correlation Coefficient

Vulcan Materials  Airbnb

Very poor diversification

The 3 months correlation between Vulcan and Airbnb is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials and Airbnb Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airbnb Inc and Vulcan Materials 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 Vulcan Materials are associated (or correlated) with Airbnb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airbnb Inc has no effect on the direction of Vulcan Materials i.e., Vulcan Materials and Airbnb go up and down completely randomly.

Pair Corralation between Vulcan Materials and Airbnb

Assuming the 90 days trading horizon Vulcan Materials is expected to under-perform the Airbnb. But the stock apears to be less risky and, when comparing its historical volatility, Vulcan Materials is 1.43 times less risky than Airbnb. The stock trades about -0.26 of its potential returns per unit of risk. The Airbnb Inc is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  4,163  in Airbnb Inc on October 4, 2024 and sell it today you would lose (82.00) from holding Airbnb Inc or give up 1.97% of portfolio value over 90 days.

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

Vulcan Materials  vs.  Airbnb Inc

Vulcan Materials

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Vulcan Materials sustained solid returns over the last few months and may actually be approaching a breakup point.

Airbnb Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Airbnb Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Airbnb sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vulcan Materials and Airbnb

The main advantage of trading using opposite Vulcan Materials and Airbnb positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vulcan Materials position performs unexpectedly, Airbnb 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 Airbnb will offset losses from the drop in Airbnb's long position.

The idea behind Vulcan Materials and Airbnb Inc 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..