Correlation Between Vulcan Materials and CARSALESCOM

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

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

Diversification Opportunities for Vulcan Materials and CARSALESCOM

0.65

Correlation Coefficient

Vulcan Materials  CARSALESCOM

Poor diversification

The 3 months correlation between Vulcan and CARSALESCOM is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials and CARSALESCOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARSALESCOM 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 CARSALESCOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARSALESCOM has no effect on the direction of Vulcan Materials i.e., Vulcan Materials and CARSALESCOM go up and down completely randomly.

Pair Corralation between Vulcan Materials and CARSALESCOM

Assuming the 90 days horizon Vulcan Materials is expected to generate 1.26 times less return on investment than CARSALESCOM. In addition to that, Vulcan Materials is 1.05 times more volatile than CARSALESCOM. It trades about 0.06 of its total potential returns per unit of risk. CARSALESCOM is currently generating about 0.08 per unit of volatility. If you would invest  1,338  in CARSALESCOM on October 11, 2024 and sell it today you would earn a total of  1,022  from holding CARSALESCOM or generate 76.38% return on investment over 90 days.

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

Vulcan Materials  vs.  CARSALESCOM

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 fragile basic indicators, Vulcan Materials reported solid returns over the last few months and may actually be approaching a breakup point.

CARSALESCOM

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CARSALESCOM are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, CARSALESCOM is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vulcan Materials and CARSALESCOM

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

The idea behind Vulcan Materials and CARSALESCOM 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.