Correlation Between Vulcan Materials and Empire Metals

Can any of the company-specific risk be diversified away by investing in both Vulcan Materials and Empire Metals 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 Empire Metals 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 Empire Metals Limited, you can compare the effects of market volatilities on Vulcan Materials and Empire Metals 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 Empire Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vulcan Materials and Empire Metals.

Diversification Opportunities for Vulcan Materials and Empire Metals

-0.78

Correlation Coefficient

Vulcan Materials  Empire Metals

Pay attention - limited upside

The 3 months correlation between Vulcan and Empire is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials Co and Empire Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empire Metals Limited 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 Empire Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empire Metals Limited has no effect on the direction of Vulcan Materials i.e., Vulcan Materials and Empire Metals go up and down completely randomly.

Pair Corralation between Vulcan Materials and Empire Metals

Assuming the 90 days trading horizon Vulcan Materials Co is expected to generate 0.65 times more return on investment than Empire Metals. However, Vulcan Materials Co is 1.53 times less risky than Empire Metals. It trades about 0.06 of its potential returns per unit of risk. Empire Metals Limited is currently generating about -0.04 per unit of risk. If you would invest  24,900  in Vulcan Materials Co on September 28, 2024 and sell it today you would earn a total of  1,581  from holding Vulcan Materials Co or generate 6.35% return on investment over 90 days.

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

Vulcan Materials Co  vs.  Empire Metals Limited

Vulcan Materials

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Vulcan Materials may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Empire Metals Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Empire Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Vulcan Materials and Empire Metals

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

The idea behind Vulcan Materials Co and Empire Metals Limited 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.