Correlation Between Vulcan Steel and Carlton Investments

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

By analyzing existing cross correlation between Vulcan Steel and Carlton Investments, you can compare the effects of market volatilities on Vulcan Steel and Carlton Investments 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 Steel with a short position of Carlton Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vulcan Steel and Carlton Investments.

Diversification Opportunities for Vulcan Steel and Carlton Investments

0.51

Correlation Coefficient

Vulcan Steel  Carlton Investments

Very weak diversification

The 3 months correlation between Vulcan and Carlton is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Steel and Carlton Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlton Investments and Vulcan Steel 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 Steel are associated (or correlated) with Carlton Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlton Investments has no effect on the direction of Vulcan Steel i.e., Vulcan Steel and Carlton Investments go up and down completely randomly.

Pair Corralation between Vulcan Steel and Carlton Investments

Assuming the 90 days trading horizon Vulcan Steel is expected to generate 3.13 times more return on investment than Carlton Investments. However, Vulcan Steel is 3.13 times more volatile than Carlton Investments. It trades about 0.06 of its potential returns per unit of risk. Carlton Investments is currently generating about 0.07 per unit of risk. If you would invest  723.00  in Vulcan Steel on December 22, 2024 and sell it today you would earn a total of  69.00  from holding Vulcan Steel or generate 9.54% return on investment over 90 days.

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

Vulcan Steel  vs.  Carlton Investments

Vulcan Steel

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Steel are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Vulcan Steel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Carlton Investments

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Carlton Investments are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Carlton Investments is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vulcan Steel and Carlton Investments

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

The idea behind Vulcan Steel and Carlton Investments 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.