Correlation Between VULCAN MATERIALS and Solstad Offshore

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

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

Diversification Opportunities for VULCAN MATERIALS and Solstad Offshore

0.48

Correlation Coefficient

VULCAN MATERIALS  Solstad Offshore

Very weak diversification

The 3 months correlation between VULCAN and Solstad is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding VULCAN MATERIALS and Solstad Offshore ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solstad Offshore ASA 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 Solstad Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solstad Offshore ASA has no effect on the direction of VULCAN MATERIALS i.e., VULCAN MATERIALS and Solstad Offshore go up and down completely randomly.

Pair Corralation between VULCAN MATERIALS and Solstad Offshore

Assuming the 90 days trading horizon VULCAN MATERIALS is expected to generate 0.39 times more return on investment than Solstad Offshore. However, VULCAN MATERIALS is 2.54 times less risky than Solstad Offshore. It trades about 0.06 of its potential returns per unit of risk. Solstad Offshore ASA is currently generating about 0.02 per unit of risk. If you would invest  16,499  in VULCAN MATERIALS on September 28, 2024 and sell it today you would earn a total of  8,701  from holding VULCAN MATERIALS or generate 52.74% 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.  Solstad Offshore ASA

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.

Solstad Offshore ASA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Solstad Offshore ASA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Solstad Offshore unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VULCAN MATERIALS and Solstad Offshore

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

The idea behind VULCAN MATERIALS and Solstad Offshore ASA 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.