Correlation Between Optima Health and Vulcan Materials
Can any of the company-specific risk be diversified away by investing in both Optima Health 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 Optima Health and Vulcan Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Optima Health plc and Vulcan Materials Co, you can compare the effects of market volatilities on Optima Health 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 Optima Health with a short position of Vulcan Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Optima Health and Vulcan Materials.
Diversification Opportunities for Optima Health and Vulcan Materials
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Optima and Vulcan is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Optima Health plc and Vulcan Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials and Optima Health 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 Optima Health plc 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 Optima Health i.e., Optima Health and Vulcan Materials go up and down completely randomly.
Pair Corralation between Optima Health and Vulcan Materials
Assuming the 90 days trading horizon Optima Health plc is expected to under-perform the Vulcan Materials. But the stock apears to be less risky and, when comparing its historical volatility, Optima Health plc is 2.51 times less risky than Vulcan Materials. The stock trades about -0.34 of its potential returns per unit of risk. The Vulcan Materials Co is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 26,896 in Vulcan Materials Co on September 4, 2024 and sell it today you would earn a total of 1,797 from holding Vulcan Materials Co or generate 6.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Optima Health plc vs. Vulcan Materials Co
Performance |
| Timeline |
| Optima Health plc |
| Vulcan Materials |
Optima Health and Vulcan Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Optima Health and Vulcan Materials
The main advantage of trading using opposite Optima Health and Vulcan Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Optima Health 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.| Optima Health vs. Toyota Motor Corp | Optima Health vs. SoftBank Group Corp | Optima Health vs. OTP Bank Nyrt | Optima Health vs. Las Vegas Sands |
| 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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