Correlation Between Vulcan Materials and LBG Media

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

Diversification Opportunities for Vulcan Materials and LBG Media

-0.5

Correlation Coefficient

Vulcan Materials  LBG Media

Very good diversification

The 3 months correlation between Vulcan and LBG is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials Co and LBG Media PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LBG Media PLC 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 LBG Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LBG Media PLC has no effect on the direction of Vulcan Materials i.e., Vulcan Materials and LBG Media go up and down completely randomly.

Pair Corralation between Vulcan Materials and LBG Media

Assuming the 90 days trading horizon Vulcan Materials Co is expected to generate 0.75 times more return on investment than LBG Media. However, Vulcan Materials Co is 1.33 times less risky than LBG Media. It trades about 0.06 of its potential returns per unit of risk. LBG Media PLC is currently generating about -0.02 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

Vulcan Materials Co  vs.  LBG Media PLC

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.

LBG Media PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LBG Media PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, LBG Media 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 LBG Media

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

The idea behind Vulcan Materials Co and LBG Media PLC 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.