Correlation Between VULCAN MATERIALS and Waste Connections

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

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

Diversification Opportunities for VULCAN MATERIALS and Waste Connections

0.78

Correlation Coefficient

VULCAN MATERIALS  Waste Connections

Poor diversification

The 3 months correlation between VULCAN and Waste is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding VULCAN MATERIALS and Waste Connections in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Connections 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 Waste Connections. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Connections has no effect on the direction of VULCAN MATERIALS i.e., VULCAN MATERIALS and Waste Connections go up and down completely randomly.

Pair Corralation between VULCAN MATERIALS and Waste Connections

Assuming the 90 days trading horizon VULCAN MATERIALS is expected to generate 1.02 times less return on investment than Waste Connections. In addition to that, VULCAN MATERIALS is 2.15 times more volatile than Waste Connections. It trades about 0.21 of its total potential returns per unit of risk. Waste Connections is currently generating about 0.46 per unit of volatility. If you would invest  16,274  in Waste Connections on September 5, 2024 and sell it today you would earn a total of  1,911  from holding Waste Connections or generate 11.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

VULCAN MATERIALS  vs.  Waste Connections

VULCAN MATERIALS

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in VULCAN MATERIALS are ranked lower than 18 (%) 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.

Waste Connections

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Connections are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Waste Connections may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with VULCAN MATERIALS and Waste Connections

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

The idea behind VULCAN MATERIALS and Waste Connections 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.