Correlation Between Vulcan Materials and Office Properties

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

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

Diversification Opportunities for Vulcan Materials and Office Properties

-0.52

Correlation Coefficient

Vulcan Materials  Office Properties

Excellent diversification

The 3 months correlation between Vulcan and Office is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials and Office Properties Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Office Properties Income 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 Office Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Office Properties Income has no effect on the direction of Vulcan Materials i.e., Vulcan Materials and Office Properties go up and down completely randomly.

Pair Corralation between Vulcan Materials and Office Properties

Considering the 90-day investment horizon Vulcan Materials is expected to under-perform the Office Properties. But the stock apears to be less risky and, when comparing its historical volatility, Vulcan Materials is 2.3 times less risky than Office Properties. The stock trades about -0.34 of its potential returns per unit of risk. The Office Properties Income is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,200  in Office Properties Income on October 11, 2024 and sell it today you would lose (2.00) from holding Office Properties Income or give up 0.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Vulcan Materials  vs.  Office Properties Income

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.

Office Properties Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Office Properties Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Vulcan Materials and Office Properties

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

The idea behind Vulcan Materials and Office Properties Income 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.