Correlation Between Vulcan Materials and Marfrig Global

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

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

Diversification Opportunities for Vulcan Materials and Marfrig Global

0.85

Correlation Coefficient

Vulcan Materials  Marfrig Global

Very poor diversification

The 3 months correlation between Vulcan and Marfrig is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials and Marfrig Global Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marfrig Global Foods 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 Marfrig Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marfrig Global Foods has no effect on the direction of Vulcan Materials i.e., Vulcan Materials and Marfrig Global go up and down completely randomly.

Pair Corralation between Vulcan Materials and Marfrig Global

Assuming the 90 days trading horizon Vulcan Materials is expected to generate 1.86 times less return on investment than Marfrig Global. But when comparing it to its historical volatility, Vulcan Materials is 2.09 times less risky than Marfrig Global. It trades about 0.07 of its potential returns per unit of risk. Marfrig Global Foods is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  709.00  in Marfrig Global Foods on October 10, 2024 and sell it today you would earn a total of  971.00  from holding Marfrig Global Foods or generate 136.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.59%
Values	Daily Returns

Vulcan Materials  vs.  Marfrig Global Foods

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 uncertain primary indicators, Vulcan Materials sustained solid returns over the last few months and may actually be approaching a breakup point.

Marfrig Global Foods

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Marfrig Global Foods are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Marfrig Global unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vulcan Materials and Marfrig Global

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

The idea behind Vulcan Materials and Marfrig Global Foods 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.