Correlation Between Vulcan Materials and Compagnie

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

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

Diversification Opportunities for Vulcan Materials and Compagnie

0.79

Correlation Coefficient

Vulcan Materials  Compagnie

Poor diversification

The 3 months correlation between Vulcan and Compagnie is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials and Compagnie de Saint Gobain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie de Saint 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 Compagnie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie de Saint has no effect on the direction of Vulcan Materials i.e., Vulcan Materials and Compagnie go up and down completely randomly.

Pair Corralation between Vulcan Materials and Compagnie

Assuming the 90 days horizon Vulcan Materials is expected to under-perform the Compagnie. But the stock apears to be less risky and, when comparing its historical volatility, Vulcan Materials is 1.35 times less risky than Compagnie. The stock trades about -0.31 of its potential returns per unit of risk. The Compagnie de Saint Gobain is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  8,730  in Compagnie de Saint Gobain on September 23, 2024 and sell it today you would lose (158.00) from holding Compagnie de Saint Gobain or give up 1.81% 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.  Compagnie de Saint Gobain

Vulcan Materials

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Vulcan Materials may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Compagnie de Saint

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie de Saint Gobain are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Compagnie is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vulcan Materials and Compagnie

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

The idea behind Vulcan Materials and Compagnie de Saint Gobain 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.