Correlation Between Vulcan Steel and Vicinity Centres

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

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

Diversification Opportunities for Vulcan Steel and Vicinity Centres

0.66

Correlation Coefficient

Vulcan Steel  Vicinity Centres

Poor diversification

The 3 months correlation between Vulcan and Vicinity is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Steel and Vicinity Centres Re in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vicinity Centres 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 Vicinity Centres. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vicinity Centres has no effect on the direction of Vulcan Steel i.e., Vulcan Steel and Vicinity Centres go up and down completely randomly.

Pair Corralation between Vulcan Steel and Vicinity Centres

Assuming the 90 days trading horizon Vulcan Steel is expected to under-perform the Vicinity Centres. In addition to that, Vulcan Steel is 3.47 times more volatile than Vicinity Centres Re. It trades about -0.03 of its total potential returns per unit of risk. Vicinity Centres Re is currently generating about -0.08 per unit of volatility. If you would invest  226.00  in Vicinity Centres Re on October 10, 2024 and sell it today you would lose (11.00) from holding Vicinity Centres Re or give up 4.87% of portfolio value over 90 days.

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

Vulcan Steel  vs.  Vicinity Centres Re

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.

Vicinity Centres

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Vulcan Steel and Vicinity Centres Re 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..