Correlation Between Vulcan Steel and Sequoia Financial

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

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

Diversification Opportunities for Vulcan Steel and Sequoia Financial

0.29

Correlation Coefficient

Vulcan Steel  Sequoia Financial

Modest diversification

The 3 months correlation between Vulcan and Sequoia is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Steel and Sequoia Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sequoia Financial 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 Sequoia Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sequoia Financial has no effect on the direction of Vulcan Steel i.e., Vulcan Steel and Sequoia Financial go up and down completely randomly.

Pair Corralation between Vulcan Steel and Sequoia Financial

Assuming the 90 days trading horizon Vulcan Steel is expected to generate 1.45 times more return on investment than Sequoia Financial. However, Vulcan Steel is 1.45 times more volatile than Sequoia Financial Group. It trades about 0.04 of its potential returns per unit of risk. Sequoia Financial Group is currently generating about 0.01 per unit of risk. If you would invest  723.00  in Vulcan Steel on December 21, 2024 and sell it today you would earn a total of  30.00  from holding Vulcan Steel or generate 4.15% 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.  Sequoia Financial Group

Vulcan Steel

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Steel are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Vulcan Steel may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Sequoia Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sequoia Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sequoia Financial 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 Sequoia Financial

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

The idea behind Vulcan Steel and Sequoia Financial Group 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.