Correlation Between VULCAN MATERIALS and Gaztransport Technigaz

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

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

Diversification Opportunities for VULCAN MATERIALS and Gaztransport Technigaz

0.81

Correlation Coefficient

VULCAN MATERIALS  Gaztransport Technigaz

Very poor diversification

The 3 months correlation between VULCAN and Gaztransport is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding VULCAN MATERIALS and Gaztransport Technigaz SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaztransport Technigaz 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 Gaztransport Technigaz. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaztransport Technigaz has no effect on the direction of VULCAN MATERIALS i.e., VULCAN MATERIALS and Gaztransport Technigaz go up and down completely randomly.

Pair Corralation between VULCAN MATERIALS and Gaztransport Technigaz

Assuming the 90 days trading horizon VULCAN MATERIALS is expected to generate 0.91 times more return on investment than Gaztransport Technigaz. However, VULCAN MATERIALS is 1.1 times less risky than Gaztransport Technigaz. It trades about -0.09 of its potential returns per unit of risk. Gaztransport Technigaz SA is currently generating about -0.14 per unit of risk. If you would invest  26,200  in VULCAN MATERIALS on September 21, 2024 and sell it today you would lose (800.00) from holding VULCAN MATERIALS or give up 3.05% 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.  Gaztransport Technigaz SA

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 fragile basic indicators, VULCAN MATERIALS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Gaztransport Technigaz

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gaztransport Technigaz SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Gaztransport Technigaz 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 Gaztransport Technigaz

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

The idea behind VULCAN MATERIALS and Gaztransport Technigaz SA 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.