Correlation Between VULCAN MATERIALS and ETFS Coffee

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

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

Diversification Opportunities for VULCAN MATERIALS and ETFS Coffee

-0.22

Correlation Coefficient

VULCAN MATERIALS  ETFS Coffee

Very good diversification

The 3 months correlation between VULCAN and ETFS is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding VULCAN MATERIALS and ETFS Coffee ETC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETFS Coffee ETC 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 ETFS Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETFS Coffee ETC has no effect on the direction of VULCAN MATERIALS i.e., VULCAN MATERIALS and ETFS Coffee go up and down completely randomly.

Pair Corralation between VULCAN MATERIALS and ETFS Coffee

Assuming the 90 days trading horizon VULCAN MATERIALS is expected to under-perform the ETFS Coffee. But the stock apears to be less risky and, when comparing its historical volatility, VULCAN MATERIALS is 1.59 times less risky than ETFS Coffee. The stock trades about -0.14 of its potential returns per unit of risk. The ETFS Coffee ETC is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  5,279  in ETFS Coffee ETC on December 21, 2024 and sell it today you would earn a total of  821.00  from holding ETFS Coffee ETC or generate 15.55% return on investment over 90 days.

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

VULCAN MATERIALS  vs.  ETFS Coffee ETC

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.

ETFS Coffee ETC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ETFS Coffee ETC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ETFS Coffee reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VULCAN MATERIALS and ETFS Coffee

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

The idea behind VULCAN MATERIALS and ETFS Coffee ETC 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.