Correlation Between Vulcan Materials and Charter Communications

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

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

Diversification Opportunities for Vulcan Materials and Charter Communications

0.94

Correlation Coefficient

Vulcan Materials  Charter Communications

Almost no diversification

The 3 months correlation between Vulcan and Charter is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials and Charter Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications 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 Charter Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charter Communications has no effect on the direction of Vulcan Materials i.e., Vulcan Materials and Charter Communications go up and down completely randomly.

Pair Corralation between Vulcan Materials and Charter Communications

Assuming the 90 days horizon Vulcan Materials is expected to generate 0.4 times more return on investment than Charter Communications. However, Vulcan Materials is 2.51 times less risky than Charter Communications. It trades about -0.44 of its potential returns per unit of risk. Charter Communications is currently generating about -0.3 per unit of risk. If you would invest  27,000  in Vulcan Materials on October 4, 2024 and sell it today you would lose (2,000) from holding Vulcan Materials or give up 7.41% of portfolio value over 90 days.

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

Vulcan Materials  vs.  Charter Communications

Vulcan Materials

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials are ranked lower than 10 (%) 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.

Charter Communications

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Charter Communications reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vulcan Materials and Charter Communications

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

The idea behind Vulcan Materials and Charter Communications 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.