Correlation Between GMO Internet and Vulcan Materials
Can any of the company-specific risk be diversified away by investing in both GMO Internet 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 GMO Internet and Vulcan Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMO Internet and Vulcan Materials, you can compare the effects of market volatilities on GMO Internet 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 GMO Internet with a short position of Vulcan Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMO Internet and Vulcan Materials.
Diversification Opportunities for GMO Internet and Vulcan Materials
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GMO and Vulcan is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding GMO Internet and Vulcan Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials and GMO Internet 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 GMO Internet 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 GMO Internet i.e., GMO Internet and Vulcan Materials go up and down completely randomly.
Pair Corralation between GMO Internet and Vulcan Materials
Assuming the 90 days horizon GMO Internet is expected to generate 2.85 times less return on investment than Vulcan Materials. In addition to that, GMO Internet is 1.16 times more volatile than Vulcan Materials. It trades about 0.02 of its total potential returns per unit of risk. Vulcan Materials is currently generating about 0.06 per unit of volatility. If you would invest 14,968 in Vulcan Materials on December 7, 2024 and sell it today you would earn a total of 7,032 from holding Vulcan Materials or generate 46.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GMO Internet vs. Vulcan Materials
Performance |
| Timeline |
| GMO Internet |
| Vulcan Materials |
GMO Internet and Vulcan Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GMO Internet and Vulcan Materials
The main advantage of trading using opposite GMO Internet and Vulcan Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMO Internet 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.| GMO Internet vs. REVO INSURANCE SPA | ||
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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