Correlation Between VULCAN MATERIALS and Indus Gas

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

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

Diversification Opportunities for VULCAN MATERIALS and Indus Gas

0.45

Correlation Coefficient

VULCAN MATERIALS  Indus Gas

Very weak diversification

The 3 months correlation between VULCAN and Indus is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding VULCAN MATERIALS and Indus Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indus Gas 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 Indus Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indus Gas has no effect on the direction of VULCAN MATERIALS i.e., VULCAN MATERIALS and Indus Gas go up and down completely randomly.

Pair Corralation between VULCAN MATERIALS and Indus Gas

Assuming the 90 days trading horizon VULCAN MATERIALS is expected to under-perform the Indus Gas. But the stock apears to be less risky and, when comparing its historical volatility, VULCAN MATERIALS is 76.55 times less risky than Indus Gas. The stock trades about -0.11 of its potential returns per unit of risk. The Indus Gas is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  8.80  in Indus Gas on December 29, 2024 and sell it today you would lose (3.70) from holding Indus Gas or give up 42.05% of portfolio value over 90 days.

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

VULCAN MATERIALS  vs.  Indus Gas

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. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Indus Gas

Risk-Adjusted Performance

OK

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

Pair Trading with VULCAN MATERIALS and Indus Gas

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

The idea behind VULCAN MATERIALS and Indus Gas 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.