Correlation Between Cars and Vulcan Materials
Can any of the company-specific risk be diversified away by investing in both Cars and Vulcan Materials 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 Cars and Vulcan Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cars Inc and Vulcan Materials Co, you can compare the effects of market volatilities on Cars and Vulcan Materials 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 Cars with a short position of Vulcan Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cars and Vulcan Materials.
Diversification Opportunities for Cars and Vulcan Materials
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Cars and Vulcan is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and Vulcan Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials and Cars 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 Cars Inc are associated (or correlated) with Vulcan Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Materials has no effect on the direction of Cars i.e., Cars and Vulcan Materials go up and down completely randomly.
Pair Corralation between Cars and Vulcan Materials
Assuming the 90 days trading horizon Cars is expected to generate 1.68 times less return on investment than Vulcan Materials. In addition to that, Cars is 1.99 times more volatile than Vulcan Materials Co. It trades about 0.02 of its total potential returns per unit of risk. Vulcan Materials Co is currently generating about 0.08 per unit of volatility. If you would invest 21,662 in Vulcan Materials Co on September 4, 2024 and sell it today you would earn a total of 7,031 from holding Vulcan Materials Co or generate 32.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 59.27% |
| Values | Daily Returns |
Cars Inc vs. Vulcan Materials Co
Performance |
| Timeline |
| Cars Inc |
| Vulcan Materials |
Cars and Vulcan Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cars and Vulcan Materials
The main advantage of trading using opposite Cars and Vulcan Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cars position performs unexpectedly, Vulcan Materials 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 Vulcan Materials will offset losses from the drop in Vulcan Materials' long position.| Cars vs. Samsung Electronics Co | Cars vs. Samsung Electronics Co | Cars vs. Hyundai Motor | Cars vs. Toyota Motor Corp |
| Vulcan Materials vs. Samsung Electronics Co | Vulcan Materials vs. Samsung Electronics Co | Vulcan Materials vs. Hyundai Motor | Vulcan Materials vs. Toyota Motor Corp |
Check out your portfolio center.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.
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