Correlation Between Vulcan Materials and Axis Bank

Can any of the company-specific risk be diversified away by investing in both Vulcan Materials and Axis Bank 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 Axis Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vulcan Materials Co and Axis Bank Ltd, you can compare the effects of market volatilities on Vulcan Materials and Axis Bank 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 Axis Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vulcan Materials and Axis Bank.

Diversification Opportunities for Vulcan Materials and Axis Bank

-0.57

Correlation Coefficient

Vulcan Materials  Axis Bank

Excellent diversification

The 3 months correlation between Vulcan and Axis is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials Co and Axis Bank Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axis Bank 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 Co are associated (or correlated) with Axis Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axis Bank has no effect on the direction of Vulcan Materials i.e., Vulcan Materials and Axis Bank go up and down completely randomly.

Pair Corralation between Vulcan Materials and Axis Bank

Assuming the 90 days trading horizon Vulcan Materials Co is expected to generate 1.19 times more return on investment than Axis Bank. However, Vulcan Materials is 1.19 times more volatile than Axis Bank Ltd. It trades about 0.16 of its potential returns per unit of risk. Axis Bank Ltd is currently generating about -0.05 per unit of risk. If you would invest  23,651  in Vulcan Materials Co on September 12, 2024 and sell it today you would earn a total of  4,231  from holding Vulcan Materials Co or generate 17.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Vulcan Materials Co  vs.  Axis Bank Ltd

Vulcan Materials

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Vulcan Materials unveiled solid returns over the last few months and may actually be approaching a breakup point.

Axis Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Axis Bank Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Axis Bank is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vulcan Materials and Axis Bank

The main advantage of trading using opposite Vulcan Materials and Axis Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vulcan Materials position performs unexpectedly, Axis Bank 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 Axis Bank will offset losses from the drop in Axis Bank's long position.

The idea behind Vulcan Materials Co and Axis Bank Ltd 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.

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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.