Correlation Between Vulcan Materials and LIFENET INSURANCE

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

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

Diversification Opportunities for Vulcan Materials and LIFENET INSURANCE

0.88

Correlation Coefficient

Vulcan Materials  LIFENET INSURANCE

Very poor diversification

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

Pair Corralation between Vulcan Materials and LIFENET INSURANCE

Assuming the 90 days horizon Vulcan Materials is expected to generate 0.5 times more return on investment than LIFENET INSURANCE. However, Vulcan Materials is 1.99 times less risky than LIFENET INSURANCE. It trades about -0.03 of its potential returns per unit of risk. LIFENET INSURANCE CO is currently generating about -0.13 per unit of risk. If you would invest  26,400  in Vulcan Materials on September 17, 2024 and sell it today you would lose (200.00) from holding Vulcan Materials or give up 0.76% 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.  LIFENET INSURANCE CO

Vulcan Materials

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Vulcan Materials reported solid returns over the last few months and may actually be approaching a breakup point.

LIFENET INSURANCE

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LIFENET INSURANCE CO are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, LIFENET INSURANCE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vulcan Materials and LIFENET INSURANCE

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

The idea behind Vulcan Materials and LIFENET INSURANCE CO 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.