Correlation Between VULCAN MATERIALS and Applied Materials
Can any of the company-specific risk be diversified away by investing in both VULCAN MATERIALS and Applied 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 VULCAN MATERIALS and Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VULCAN MATERIALS and Applied Materials, you can compare the effects of market volatilities on VULCAN MATERIALS and Applied 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 VULCAN MATERIALS with a short position of Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of VULCAN MATERIALS and Applied Materials.
Diversification Opportunities for VULCAN MATERIALS and Applied Materials
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between VULCAN and Applied is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding VULCAN MATERIALS and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and VULCAN MATERIALS 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 VULCAN MATERIALS are associated (or correlated) with Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of VULCAN MATERIALS i.e., VULCAN MATERIALS and Applied Materials go up and down completely randomly.
Pair Corralation between VULCAN MATERIALS and Applied Materials
Assuming the 90 days trading horizon VULCAN MATERIALS is expected to generate 0.81 times more return on investment than Applied Materials. However, VULCAN MATERIALS is 1.23 times less risky than Applied Materials. It trades about 0.18 of its potential returns per unit of risk. Applied Materials is currently generating about 0.01 per unit of risk. If you would invest 24,954 in VULCAN MATERIALS on September 2, 2024 and sell it today you would earn a total of 2,246 from holding VULCAN MATERIALS or generate 9.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
VULCAN MATERIALS vs. Applied Materials
Performance |
| Timeline |
| VULCAN MATERIALS |
| Applied Materials |
VULCAN MATERIALS and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VULCAN MATERIALS and Applied Materials
The main advantage of trading using opposite VULCAN MATERIALS and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VULCAN MATERIALS position performs unexpectedly, Applied 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 Applied Materials will offset losses from the drop in Applied Materials' long position.| VULCAN MATERIALS vs. Apple Inc | VULCAN MATERIALS vs. Apple Inc | VULCAN MATERIALS vs. Apple Inc | VULCAN MATERIALS vs. Apple Inc |
| Applied Materials vs. PLAYTECH | Applied Materials vs. China BlueChemical | Applied Materials vs. ANTA SPORTS PRODUCT | Applied Materials vs. Sekisui Chemical Co |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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