Correlation Between Vulcan Materials and International Business

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

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

Diversification Opportunities for Vulcan Materials and International Business

-0.18

Correlation Coefficient

Vulcan Materials  International Business

Good diversification

The 3 months correlation between Vulcan and International is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business 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 International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of Vulcan Materials i.e., Vulcan Materials and International Business go up and down completely randomly.

Pair Corralation between Vulcan Materials and International Business

Assuming the 90 days trading horizon Vulcan Materials is expected to under-perform the International Business. But the stock apears to be less risky and, when comparing its historical volatility, Vulcan Materials is 1.05 times less risky than International Business. The stock trades about -0.12 of its potential returns per unit of risk. The International Business Machines is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  136,068  in International Business Machines on December 28, 2024 and sell it today you would earn a total of  8,932  from holding International Business Machines or generate 6.56% return on investment over 90 days.

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

Vulcan Materials  vs.  International Business Machine

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.

International Business

Risk-Adjusted Performance

Insignificant

Over the last 90 days International Business Machines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak primary indicators, International Business may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Vulcan Materials and International Business

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

The idea behind Vulcan Materials and International Business Machines 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.