Correlation Between Dow Jones and Vulcan Materials
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Vulcan Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Vulcan Materials Co, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Vulcan Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Vulcan Materials.
Diversification Opportunities for Dow Jones and Vulcan Materials
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dow and Vulcan is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Vulcan Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials and Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Vulcan Materials go up and down completely randomly.
Pair Corralation between Dow Jones and Vulcan Materials
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.34 times less return on investment than Vulcan Materials. But when comparing it to its historical volatility, Dow Jones Industrial is 2.24 times less risky than Vulcan Materials. It trades about 0.12 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 20,386 in Vulcan Materials Co on August 31, 2024 and sell it today you would earn a total of 8,400 from holding Vulcan Materials Co or generate 41.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.93% |
| Values | Daily Returns |
Dow Jones Industrial vs. Vulcan Materials Co
Performance |
| Timeline |
Dow Jones and Vulcan Materials Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Vulcan Materials Co
Pair trading matchups for Vulcan Materials
Pair Trading with Dow Jones and Vulcan Materials
The main advantage of trading using opposite Dow Jones and Vulcan Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Aerofoam Metals | Dow Jones vs. ACG Metals Limited | Dow Jones vs. China Clean Energy | Dow Jones vs. Fast Retailing Co |
| Vulcan Materials vs. Neometals | Vulcan Materials vs. Coor Service Management | Vulcan Materials vs. Aeorema Communications Plc | Vulcan Materials vs. JLEN Environmental Assets |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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