Correlation Between Vulcan Materials and British American
Can any of the company-specific risk be diversified away by investing in both Vulcan Materials and British American 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 Materials and British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vulcan Materials Co and British American Tobacco, you can compare the effects of market volatilities on Vulcan Materials and British American 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 Materials with a short position of British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vulcan Materials and British American.
Diversification Opportunities for Vulcan Materials and British American
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vulcan and British is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials Co and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco and Vulcan Materials 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 Materials Co are associated (or correlated) with British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Vulcan Materials i.e., Vulcan Materials and British American go up and down completely randomly.
Pair Corralation between Vulcan Materials and British American
Assuming the 90 days trading horizon Vulcan Materials Co is expected to under-perform the British American. In addition to that, Vulcan Materials is 1.21 times more volatile than British American Tobacco. It trades about -0.28 of its total potential returns per unit of risk. British American Tobacco is currently generating about -0.04 per unit of volatility. If you would invest 3,653 in British American Tobacco on September 24, 2024 and sell it today you would lose (43.00) from holding British American Tobacco or give up 1.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vulcan Materials Co vs. British American Tobacco
Performance |
| Timeline |
| Vulcan Materials |
| British American Tobacco |
Vulcan Materials and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vulcan Materials and British American
The main advantage of trading using opposite Vulcan Materials and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vulcan Materials position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.| Vulcan Materials vs. Uniper SE | Vulcan Materials vs. Mulberry Group PLC | Vulcan Materials vs. London Security Plc | Vulcan Materials vs. Triad Group PLC |
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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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