Correlation Between Vulcan Materials and MULTI CHEM

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

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

Diversification Opportunities for Vulcan Materials and MULTI CHEM

-0.1

Correlation Coefficient

Vulcan Materials  MULTI CHEM

Good diversification

The 3 months correlation between Vulcan and MULTI is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials and MULTI CHEM LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MULTI CHEM LTD 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 MULTI CHEM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MULTI CHEM LTD has no effect on the direction of Vulcan Materials i.e., Vulcan Materials and MULTI CHEM go up and down completely randomly.

Pair Corralation between Vulcan Materials and MULTI CHEM

Assuming the 90 days horizon Vulcan Materials is expected to generate 1.11 times less return on investment than MULTI CHEM. But when comparing it to its historical volatility, Vulcan Materials is 2.68 times less risky than MULTI CHEM. It trades about 0.21 of its potential returns per unit of risk. MULTI CHEM LTD is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  185.00  in MULTI CHEM LTD on October 22, 2024 and sell it today you would earn a total of  8.00  from holding MULTI CHEM LTD or generate 4.32% return on investment over 90 days.

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

Vulcan Materials  vs.  MULTI CHEM LTD

Vulcan Materials

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Vulcan Materials reported solid returns over the last few months and may actually be approaching a breakup point.

MULTI CHEM LTD

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MULTI CHEM LTD are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, MULTI CHEM may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Vulcan Materials and MULTI CHEM

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

The idea behind Vulcan Materials and MULTI CHEM LTD 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.