Correlation Between VULCAN MATERIALS and VARIOUS EATERIES

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

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

Diversification Opportunities for VULCAN MATERIALS and VARIOUS EATERIES

-0.09

Correlation Coefficient

VULCAN MATERIALS  VARIOUS EATERIES

Good diversification

The 3 months correlation between VULCAN and VARIOUS is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding VULCAN MATERIALS and VARIOUS EATERIES LS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VARIOUS EATERIES 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 VARIOUS EATERIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VARIOUS EATERIES has no effect on the direction of VULCAN MATERIALS i.e., VULCAN MATERIALS and VARIOUS EATERIES go up and down completely randomly.

Pair Corralation between VULCAN MATERIALS and VARIOUS EATERIES

Assuming the 90 days trading horizon VULCAN MATERIALS is expected to under-perform the VARIOUS EATERIES. In addition to that, VULCAN MATERIALS is 1.23 times more volatile than VARIOUS EATERIES LS. It trades about -0.33 of its total potential returns per unit of risk. VARIOUS EATERIES LS is currently generating about -0.24 per unit of volatility. If you would invest  20.00  in VARIOUS EATERIES LS on October 10, 2024 and sell it today you would lose (1.00) from holding VARIOUS EATERIES LS or give up 5.0% of portfolio value over 90 days.

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

VULCAN MATERIALS  vs.  VARIOUS EATERIES LS

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. In spite of comparatively uncertain basic indicators, VULCAN MATERIALS unveiled solid returns over the last few months and may actually be approaching a breakup point.

VARIOUS EATERIES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VARIOUS EATERIES LS 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 VARIOUS EATERIES

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

The idea behind VULCAN MATERIALS and VARIOUS EATERIES LS 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.