Correlation Between CAIRN HOMES and Vulcan Materials
Can any of the company-specific risk be diversified away by investing in both CAIRN HOMES 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 CAIRN HOMES and Vulcan Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CAIRN HOMES EO and Vulcan Materials, you can compare the effects of market volatilities on CAIRN HOMES 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 CAIRN HOMES with a short position of Vulcan Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAIRN HOMES and Vulcan Materials.
Diversification Opportunities for CAIRN HOMES and Vulcan Materials
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CAIRN and Vulcan is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding CAIRN HOMES EO and Vulcan Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials and CAIRN HOMES 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 CAIRN HOMES EO 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 CAIRN HOMES i.e., CAIRN HOMES and Vulcan Materials go up and down completely randomly.
Pair Corralation between CAIRN HOMES and Vulcan Materials
Assuming the 90 days horizon CAIRN HOMES EO is expected to under-perform the Vulcan Materials. In addition to that, CAIRN HOMES is 1.7 times more volatile than Vulcan Materials. It trades about -0.11 of its total potential returns per unit of risk. Vulcan Materials is currently generating about 0.2 per unit of volatility. If you would invest 24,800 in Vulcan Materials on November 5, 2024 and sell it today you would earn a total of 1,400 from holding Vulcan Materials or generate 5.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CAIRN HOMES EO vs. Vulcan Materials
Performance |
| Timeline |
| CAIRN HOMES EO |
| Vulcan Materials |
CAIRN HOMES and Vulcan Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CAIRN HOMES and Vulcan Materials
The main advantage of trading using opposite CAIRN HOMES and Vulcan Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CAIRN HOMES 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.The idea behind CAIRN HOMES EO and Vulcan Materials 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.| Vulcan Materials vs. Compagnie Plastic Omnium | Vulcan Materials vs. Plastic Omnium | Vulcan Materials vs. Summit Materials | Vulcan Materials vs. INTER CARS SA |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
Other Complementary Tools
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities |