Correlation Between Vulcan Materials and International Consolidated

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

Diversification Opportunities for Vulcan Materials and International Consolidated

0.6

Correlation Coefficient

Vulcan Materials  International Consolidated

Poor diversification

The 3 months correlation between Vulcan and International is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials Co and International Consolidated Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Consolidated 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 International Consolidated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Consolidated has no effect on the direction of Vulcan Materials i.e., Vulcan Materials and International Consolidated go up and down completely randomly.

Pair Corralation between Vulcan Materials and International Consolidated

Assuming the 90 days trading horizon Vulcan Materials is expected to generate 6.38 times less return on investment than International Consolidated. In addition to that, Vulcan Materials is 1.01 times more volatile than International Consolidated Airlines. It trades about 0.05 of its total potential returns per unit of risk. International Consolidated Airlines is currently generating about 0.33 per unit of volatility. If you would invest  20,810  in International Consolidated Airlines on September 26, 2024 and sell it today you would earn a total of  9,340  from holding International Consolidated Airlines or generate 44.88% return on investment over 90 days.

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

Vulcan Materials Co  vs.  International Consolidated Air

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 stable basic indicators, Vulcan Materials is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

International Consolidated

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in International Consolidated Airlines are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, International Consolidated exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vulcan Materials and International Consolidated

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

The idea behind Vulcan Materials Co and International Consolidated Airlines 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.