Correlation Between Auto Trader and Vulcan Materials
Can any of the company-specific risk be diversified away by investing in both Auto Trader 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 Auto Trader and Vulcan Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Auto Trader Group and Vulcan Materials Co, you can compare the effects of market volatilities on Auto Trader 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 Auto Trader with a short position of Vulcan Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auto Trader and Vulcan Materials.
Diversification Opportunities for Auto Trader and Vulcan Materials
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Auto and Vulcan is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader Group and Vulcan Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials and Auto Trader 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 Auto Trader Group 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 Auto Trader i.e., Auto Trader and Vulcan Materials go up and down completely randomly.
Pair Corralation between Auto Trader and Vulcan Materials
Assuming the 90 days trading horizon Auto Trader is expected to generate 1.03 times less return on investment than Vulcan Materials. But when comparing it to its historical volatility, Auto Trader Group is 1.08 times less risky than Vulcan Materials. It trades about 0.08 of its potential returns per unit of risk. Vulcan Materials Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 17,587 in Vulcan Materials Co on August 26, 2024 and sell it today you would earn a total of 10,734 from holding Vulcan Materials Co or generate 61.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 97.29% |
| Values | Daily Returns |
Auto Trader Group vs. Vulcan Materials Co
Performance |
| Timeline |
| Auto Trader Group |
| Vulcan Materials |
Auto Trader and Vulcan Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Auto Trader and Vulcan Materials
The main advantage of trading using opposite Auto Trader and Vulcan Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auto Trader 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.| Auto Trader vs. Ondine Biomedical | Auto Trader vs. Europa Metals | Auto Trader vs. Revolution Beauty Group | Auto Trader vs. Biome Technologies Plc |
| 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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