Correlation Between Vulcan Materials and PT Solusi

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

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

Diversification Opportunities for Vulcan Materials and PT Solusi

0.38

Correlation Coefficient

Vulcan Materials  PT Solusi

Weak diversification

The 3 months correlation between Vulcan and RU6 is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials and PT Solusi Bangun in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Solusi Bangun 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 PT Solusi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Solusi Bangun has no effect on the direction of Vulcan Materials i.e., Vulcan Materials and PT Solusi go up and down completely randomly.

Pair Corralation between Vulcan Materials and PT Solusi

Assuming the 90 days horizon Vulcan Materials is expected to generate 10.56 times less return on investment than PT Solusi. But when comparing it to its historical volatility, Vulcan Materials is 12.97 times less risky than PT Solusi. It trades about 0.07 of its potential returns per unit of risk. PT Solusi Bangun is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  6.35  in PT Solusi Bangun on September 14, 2024 and sell it today you would lose (2.75) from holding PT Solusi Bangun or give up 43.31% of portfolio value over 90 days.

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

Vulcan Materials  vs.  PT Solusi Bangun

Vulcan Materials

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Vulcan Materials reported solid returns over the last few months and may actually be approaching a breakup point.

PT Solusi Bangun

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PT Solusi Bangun are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PT Solusi reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vulcan Materials and PT Solusi

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

The idea behind Vulcan Materials and PT Solusi Bangun 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.