Correlation Between VULCAN MATERIALS and UMWELTBANK

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

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

Diversification Opportunities for VULCAN MATERIALS and UMWELTBANK

0.81

Correlation Coefficient

VULCAN MATERIALS  UMWELTBANK

Very poor diversification

The 3 months correlation between VULCAN and UMWELTBANK is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding VULCAN MATERIALS and UMWELTBANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMWELTBANK 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 UMWELTBANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UMWELTBANK has no effect on the direction of VULCAN MATERIALS i.e., VULCAN MATERIALS and UMWELTBANK go up and down completely randomly.

Pair Corralation between VULCAN MATERIALS and UMWELTBANK

Assuming the 90 days trading horizon VULCAN MATERIALS is expected to under-perform the UMWELTBANK. But the stock apears to be less risky and, when comparing its historical volatility, VULCAN MATERIALS is 1.5 times less risky than UMWELTBANK. The stock trades about -0.28 of its potential returns per unit of risk. The UMWELTBANK is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  628.00  in UMWELTBANK on September 29, 2024 and sell it today you would lose (14.00) from holding UMWELTBANK or give up 2.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.0%
Values	Daily Returns

VULCAN MATERIALS  vs.  UMWELTBANK

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.

UMWELTBANK

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in UMWELTBANK are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile forward-looking signals, UMWELTBANK exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VULCAN MATERIALS and UMWELTBANK

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

The idea behind VULCAN MATERIALS and UMWELTBANK 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.