Correlation Between VULCAN MATERIALS and Strategic Investments

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

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

Diversification Opportunities for VULCAN MATERIALS and Strategic Investments

-0.46

Correlation Coefficient

VULCAN MATERIALS  Strategic Investments

Very good diversification

The 3 months correlation between VULCAN and Strategic is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding VULCAN MATERIALS and Strategic Investments AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Investments 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 Strategic Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Investments has no effect on the direction of VULCAN MATERIALS i.e., VULCAN MATERIALS and Strategic Investments go up and down completely randomly.

Pair Corralation between VULCAN MATERIALS and Strategic Investments

Assuming the 90 days trading horizon VULCAN MATERIALS is expected to generate 0.49 times more return on investment than Strategic Investments. However, VULCAN MATERIALS is 2.03 times less risky than Strategic Investments. It trades about -0.14 of its potential returns per unit of risk. Strategic Investments AS is currently generating about -0.1 per unit of risk. If you would invest  26,600  in VULCAN MATERIALS on September 22, 2024 and sell it today you would lose (1,200) from holding VULCAN MATERIALS or give up 4.51% of portfolio value over 90 days.

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

VULCAN MATERIALS  vs.  Strategic Investments AS

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.

Strategic Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Strategic Investments AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Strategic Investments is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with VULCAN MATERIALS and Strategic Investments

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

The idea behind VULCAN MATERIALS and Strategic Investments AS 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.