Correlation Between Vulcan Steel and Energy Technologies

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

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

Diversification Opportunities for Vulcan Steel and Energy Technologies

0.32

Correlation Coefficient

Vulcan Steel  Energy Technologies

Weak diversification

The 3 months correlation between Vulcan and Energy is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Steel and Energy Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Technologies 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 Energy Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Technologies has no effect on the direction of Vulcan Steel i.e., Vulcan Steel and Energy Technologies go up and down completely randomly.

Pair Corralation between Vulcan Steel and Energy Technologies

Assuming the 90 days trading horizon Vulcan Steel is expected to generate 3.44 times less return on investment than Energy Technologies. But when comparing it to its historical volatility, Vulcan Steel is 1.19 times less risky than Energy Technologies. It trades about 0.07 of its potential returns per unit of risk. Energy Technologies Limited is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  3.10  in Energy Technologies Limited on October 6, 2024 and sell it today you would earn a total of  0.50  from holding Energy Technologies Limited or generate 16.13% return on investment over 90 days.

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

Vulcan Steel  vs.  Energy Technologies Limited

Vulcan Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vulcan Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Vulcan Steel is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Energy Technologies

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Technologies Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Energy Technologies 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 Energy Technologies

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

The idea behind Vulcan Steel and Energy Technologies Limited 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.