Correlation Between Vulcan Materials and Equinix

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

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

Diversification Opportunities for Vulcan Materials and Equinix

0.77

Correlation Coefficient

Vulcan Materials  Equinix

Poor diversification

The 3 months correlation between Vulcan and Equinix is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials and Equinix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinix 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 Equinix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinix has no effect on the direction of Vulcan Materials i.e., Vulcan Materials and Equinix go up and down completely randomly.

Pair Corralation between Vulcan Materials and Equinix

Assuming the 90 days horizon Vulcan Materials is expected to under-perform the Equinix. But the stock apears to be less risky and, when comparing its historical volatility, Vulcan Materials is 1.83 times less risky than Equinix. The stock trades about -0.43 of its potential returns per unit of risk. The Equinix is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  92,920  in Equinix on October 8, 2024 and sell it today you would lose (1,620) from holding Equinix or give up 1.74% of portfolio value over 90 days.

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

Vulcan Materials  vs.  Equinix

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.

Equinix

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Vulcan Materials and Equinix

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

The idea behind Vulcan Materials and Equinix 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.