Correlation Between De Grey and Vulcan Steel

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

By analyzing existing cross correlation between De Grey Mining and Vulcan Steel, you can compare the effects of market volatilities on De Grey and Vulcan Steel 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 De Grey with a short position of Vulcan Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of De Grey and Vulcan Steel.

Diversification Opportunities for De Grey and Vulcan Steel

-0.63

Correlation Coefficient

De Grey  Vulcan Steel

Excellent diversification

The 3 months correlation between DEG and Vulcan is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding De Grey Mining and Vulcan Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Steel and De Grey 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 De Grey Mining are associated (or correlated) with Vulcan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Steel has no effect on the direction of De Grey i.e., De Grey and Vulcan Steel go up and down completely randomly.

Pair Corralation between De Grey and Vulcan Steel

Assuming the 90 days trading horizon De Grey Mining is expected to generate 1.11 times more return on investment than Vulcan Steel. However, De Grey is 1.11 times more volatile than Vulcan Steel. It trades about 0.14 of its potential returns per unit of risk. Vulcan Steel is currently generating about 0.03 per unit of risk. If you would invest  108.00  in De Grey Mining on September 19, 2024 and sell it today you would earn a total of  77.00  from holding De Grey Mining or generate 71.3% return on investment over 90 days.

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

De Grey Mining  vs.  Vulcan Steel

De Grey Mining

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in De Grey Mining are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, De Grey unveiled solid returns over the last few months and may actually be approaching a breakup point.

Vulcan Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vulcan Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Vulcan Steel is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with De Grey and Vulcan Steel

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

The idea behind De Grey Mining and Vulcan Steel 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.