Correlation Between Vulcan Materials and Aluminum

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

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

Diversification Opportunities for Vulcan Materials and Aluminum

-0.04

Correlation Coefficient

Vulcan Materials  Aluminum

Good diversification

The 3 months correlation between Vulcan and Aluminum is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials and Aluminum of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aluminum 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 Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aluminum has no effect on the direction of Vulcan Materials i.e., Vulcan Materials and Aluminum go up and down completely randomly.

Pair Corralation between Vulcan Materials and Aluminum

Considering the 90-day investment horizon Vulcan Materials is expected to under-perform the Aluminum. But the stock apears to be less risky and, when comparing its historical volatility, Vulcan Materials is 1.69 times less risky than Aluminum. The stock trades about -0.08 of its potential returns per unit of risk. The Aluminum of is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  55.00  in Aluminum of on December 20, 2024 and sell it today you would earn a total of  12.00  from holding Aluminum of or generate 21.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.61%
Values	Daily Returns

Vulcan Materials  vs.  Aluminum of

Vulcan Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vulcan Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Aluminum

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aluminum of are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Aluminum reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vulcan Materials and Aluminum

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

The idea behind Vulcan Materials and Aluminum of 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .