Correlation Between Vulcan Energy and Ams AG

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

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

Diversification Opportunities for Vulcan Energy and Ams AG

-0.4

Correlation Coefficient

Vulcan Energy  Ams AG

Very good diversification

The 3 months correlation between Vulcan and Ams is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Energy Resources and ams AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ams AG and Vulcan Energy 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 Energy Resources are associated (or correlated) with Ams AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ams AG has no effect on the direction of Vulcan Energy i.e., Vulcan Energy and Ams AG go up and down completely randomly.

Pair Corralation between Vulcan Energy and Ams AG

Assuming the 90 days horizon Vulcan Energy is expected to generate 87.7 times less return on investment than Ams AG. But when comparing it to its historical volatility, Vulcan Energy Resources is 28.88 times less risky than Ams AG. It trades about 0.09 of its potential returns per unit of risk. ams AG is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  2,350  in ams AG on October 2, 2024 and sell it today you would lose (1,615) from holding ams AG or give up 68.72% of portfolio value over 90 days.

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

Vulcan Energy Resources  vs.  ams AG

Vulcan Energy Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Energy Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Vulcan Energy reported solid returns over the last few months and may actually be approaching a breakup point.

ams AG

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ams AG are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Ams AG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vulcan Energy and Ams AG

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

The idea behind Vulcan Energy Resources and ams AG 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.