Correlation Between Vulcan Materials and Knife River

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

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

Diversification Opportunities for Vulcan Materials and Knife River

0.82

Correlation Coefficient

Vulcan Materials  Knife River

Very poor diversification

The 3 months correlation between Vulcan and Knife is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials and Knife River in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knife River 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 Knife River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knife River has no effect on the direction of Vulcan Materials i.e., Vulcan Materials and Knife River go up and down completely randomly.

Pair Corralation between Vulcan Materials and Knife River

Considering the 90-day investment horizon Vulcan Materials is expected to under-perform the Knife River. But the stock apears to be less risky and, when comparing its historical volatility, Vulcan Materials is 1.98 times less risky than Knife River. The stock trades about -0.32 of its potential returns per unit of risk. The Knife River is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  10,265  in Knife River on September 23, 2024 and sell it today you would earn a total of  306.00  from holding Knife River or generate 2.98% return on investment over 90 days.

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

Vulcan Materials  vs.  Knife River

Vulcan Materials

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Vulcan Materials is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Knife River

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Vulcan Materials and Knife River

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

The idea behind Vulcan Materials and Knife River 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.