Correlation Between Vulcan Materials and Carnival Plc

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

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

Diversification Opportunities for Vulcan Materials and Carnival Plc

0.88

Correlation Coefficient

Vulcan Materials  Carnival Plc

Very poor diversification

The 3 months correlation between Vulcan and Carnival is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials and Carnival plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carnival plc 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 Carnival Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carnival plc has no effect on the direction of Vulcan Materials i.e., Vulcan Materials and Carnival Plc go up and down completely randomly.

Pair Corralation between Vulcan Materials and Carnival Plc

Assuming the 90 days trading horizon Vulcan Materials is expected to generate 2.14 times less return on investment than Carnival Plc. But when comparing it to its historical volatility, Vulcan Materials is 1.1 times less risky than Carnival Plc. It trades about 0.15 of its potential returns per unit of risk. Carnival plc is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  9,846  in Carnival plc on October 4, 2024 and sell it today you would earn a total of  5,610  from holding Carnival plc or generate 56.98% return on investment over 90 days.

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

Vulcan Materials  vs.  Carnival plc

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.

Carnival plc

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Carnival plc are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Carnival Plc sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vulcan Materials and Carnival Plc

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

The idea behind Vulcan Materials and Carnival plc 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.