Correlation Between Vulcan Materials and GOODYEAR T

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

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

Diversification Opportunities for Vulcan Materials and GOODYEAR T

0.87

Correlation Coefficient

Vulcan Materials  GOODYEAR T

Very poor diversification

The 3 months correlation between Vulcan and GOODYEAR is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials and GOODYEAR T RUBBER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GOODYEAR T RUBBER 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 GOODYEAR T. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GOODYEAR T RUBBER has no effect on the direction of Vulcan Materials i.e., Vulcan Materials and GOODYEAR T go up and down completely randomly.

Pair Corralation between Vulcan Materials and GOODYEAR T

Assuming the 90 days horizon Vulcan Materials is expected to generate 0.63 times more return on investment than GOODYEAR T. However, Vulcan Materials is 1.59 times less risky than GOODYEAR T. It trades about 0.02 of its potential returns per unit of risk. GOODYEAR T RUBBER is currently generating about -0.05 per unit of risk. If you would invest  24,058  in Vulcan Materials on September 24, 2024 and sell it today you would earn a total of  942.00  from holding Vulcan Materials or generate 3.92% return on investment over 90 days.

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

Vulcan Materials  vs.  GOODYEAR T RUBBER

Vulcan Materials

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials are ranked lower than 9 (%) 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.

GOODYEAR T RUBBER

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GOODYEAR T RUBBER are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, GOODYEAR T unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vulcan Materials and GOODYEAR T

The main advantage of trading using opposite Vulcan Materials and GOODYEAR T positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vulcan Materials position performs unexpectedly, GOODYEAR T 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 GOODYEAR T will offset losses from the drop in GOODYEAR T's long position.

The idea behind Vulcan Materials and GOODYEAR T RUBBER 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.