Correlation Between VULCAN MATERIALS and Elanco Animal

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

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

Diversification Opportunities for VULCAN MATERIALS and Elanco Animal

0.87

Correlation Coefficient

VULCAN MATERIALS  Elanco Animal

Very poor diversification

The 3 months correlation between VULCAN and Elanco is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding VULCAN MATERIALS and Elanco Animal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elanco Animal Health 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 Elanco Animal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elanco Animal Health has no effect on the direction of VULCAN MATERIALS i.e., VULCAN MATERIALS and Elanco Animal go up and down completely randomly.

Pair Corralation between VULCAN MATERIALS and Elanco Animal

Assuming the 90 days trading horizon VULCAN MATERIALS is expected to under-perform the Elanco Animal. But the stock apears to be less risky and, when comparing its historical volatility, VULCAN MATERIALS is 1.42 times less risky than Elanco Animal. The stock trades about -0.13 of its potential returns per unit of risk. The Elanco Animal Health is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  1,110  in Elanco Animal Health on December 22, 2024 and sell it today you would lose (126.00) from holding Elanco Animal Health or give up 11.35% of portfolio value over 90 days.

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

VULCAN MATERIALS  vs.  Elanco Animal Health

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 fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Elanco Animal Health

Risk-Adjusted Performance

Very Weak

Over the last 90 days Elanco Animal Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with VULCAN MATERIALS and Elanco Animal

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

The idea behind VULCAN MATERIALS and Elanco Animal Health 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.