Correlation Between Vulcan Materials and Holcim

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

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

Diversification Opportunities for Vulcan Materials and Holcim

-0.78

Correlation Coefficient

Vulcan Materials  Holcim

Pay attention - limited upside

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

Pair Corralation between Vulcan Materials and Holcim

Considering the 90-day investment horizon Vulcan Materials is expected to under-perform the Holcim. But the stock apears to be less risky and, when comparing its historical volatility, Vulcan Materials is 1.19 times less risky than Holcim. The stock trades about -0.1 of its potential returns per unit of risk. The Holcim is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  9,785  in Holcim on December 28, 2024 and sell it today you would earn a total of  1,399  from holding Holcim or generate 14.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Vulcan Materials  vs.  Holcim

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.

Holcim

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Holcim are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Holcim reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vulcan Materials and Holcim

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

The idea behind Vulcan Materials and Holcim 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 Transaction History module to view history of all your transactions and understand their impact on performance.