Correlation Between VULCAN MATERIALS and GMO Internet

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

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

Diversification Opportunities for VULCAN MATERIALS and GMO Internet

0.45

Correlation Coefficient

VULCAN MATERIALS  GMO Internet

Very weak diversification

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

Pair Corralation between VULCAN MATERIALS and GMO Internet

Assuming the 90 days trading horizon VULCAN MATERIALS is expected to generate 7.96 times less return on investment than GMO Internet. But when comparing it to its historical volatility, VULCAN MATERIALS is 4.89 times less risky than GMO Internet. It trades about 0.05 of its potential returns per unit of risk. GMO Internet is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  365.00  in GMO Internet on October 6, 2024 and sell it today you would earn a total of  1,255  from holding GMO Internet or generate 343.84% return on investment over 90 days.

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

VULCAN MATERIALS  vs.  GMO Internet

VULCAN MATERIALS

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VULCAN MATERIALS are ranked lower than 9 (%) 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.

GMO Internet

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GMO Internet are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, GMO Internet may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with VULCAN MATERIALS and GMO Internet

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

The idea behind VULCAN MATERIALS and GMO Internet 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.