Correlation Between VULCAN MATERIALS and Sandfire Resources

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

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

Diversification Opportunities for VULCAN MATERIALS and Sandfire Resources

-0.23

Correlation Coefficient

VULCAN MATERIALS  Sandfire Resources

Very good diversification

The 3 months correlation between VULCAN and Sandfire is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding VULCAN MATERIALS and Sandfire Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandfire Resources 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 Sandfire Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandfire Resources has no effect on the direction of VULCAN MATERIALS i.e., VULCAN MATERIALS and Sandfire Resources go up and down completely randomly.

Pair Corralation between VULCAN MATERIALS and Sandfire Resources

Assuming the 90 days trading horizon VULCAN MATERIALS is expected to generate 0.66 times more return on investment than Sandfire Resources. However, VULCAN MATERIALS is 1.52 times less risky than Sandfire Resources. It trades about -0.14 of its potential returns per unit of risk. Sandfire Resources Limited is currently generating about -0.29 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

VULCAN MATERIALS  vs.  Sandfire Resources Limited

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.

Sandfire Resources

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Sandfire Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sandfire Resources 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 Sandfire Resources

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

The idea behind VULCAN MATERIALS and Sandfire Resources Limited 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.