Correlation Between VULCAN MATERIALS and WD 40

Can any of the company-specific risk be diversified away by investing in both VULCAN MATERIALS and WD 40 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 WD 40 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between VULCAN MATERIALS and WD 40 CO, you can compare the effects of market volatilities on VULCAN MATERIALS and WD 40 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 WD 40. Check out your portfolio center. Please also check ongoing floating volatility patterns of VULCAN MATERIALS and WD 40.

Diversification Opportunities for VULCAN MATERIALS and WD 40

0.85

Correlation Coefficient

VULCAN MATERIALS  WD 40

Very poor diversification

The 3 months correlation between VULCAN and WD1 is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding VULCAN MATERIALS and WD 40 CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WD 40 CO 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 WD 40. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WD 40 CO has no effect on the direction of VULCAN MATERIALS i.e., VULCAN MATERIALS and WD 40 go up and down completely randomly.

Pair Corralation between VULCAN MATERIALS and WD 40

Assuming the 90 days trading horizon VULCAN MATERIALS is expected to generate 1.34 times more return on investment than WD 40. However, VULCAN MATERIALS is 1.34 times more volatile than WD 40 CO. It trades about -0.29 of its potential returns per unit of risk. WD 40 CO is currently generating about -0.56 per unit of risk. If you would invest  27,000  in VULCAN MATERIALS on October 5, 2024 and sell it today you would lose (2,000) from holding VULCAN MATERIALS or give up 7.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	94.44%
Values	Daily Returns

VULCAN MATERIALS  vs.  WD 40 CO

VULCAN MATERIALS

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days VULCAN MATERIALS has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

WD 40 CO

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WD 40 CO are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, WD 40 is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with VULCAN MATERIALS and WD 40

The main advantage of trading using opposite VULCAN MATERIALS and WD 40 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VULCAN MATERIALS position performs unexpectedly, WD 40 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 WD 40 will offset losses from the drop in WD 40's long position.

The idea behind VULCAN MATERIALS and WD 40 CO 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.