Correlation Between Vulcan Materials and Tempur Sealy

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

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

Diversification Opportunities for Vulcan Materials and Tempur Sealy

0.38

Correlation Coefficient

Vulcan Materials  Tempur Sealy

Weak diversification

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

Pair Corralation between Vulcan Materials and Tempur Sealy

Assuming the 90 days horizon Vulcan Materials is expected to under-perform the Tempur Sealy. But the stock apears to be less risky and, when comparing its historical volatility, Vulcan Materials is 1.45 times less risky than Tempur Sealy. The stock trades about -0.15 of its potential returns per unit of risk. The Tempur Sealy International is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  5,188  in Tempur Sealy International on December 20, 2024 and sell it today you would lose (188.00) from holding Tempur Sealy International or give up 3.62% 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.  Tempur Sealy International

Vulcan Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vulcan Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Tempur Sealy Interna

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tempur Sealy International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Tempur Sealy 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 Tempur Sealy

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

The idea behind Vulcan Materials and Tempur Sealy International 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.