Correlation Between Transport International and Vulcan Materials

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

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

Diversification Opportunities for Transport International and Vulcan Materials

-0.37

Correlation Coefficient

Transport International  Vulcan Materials

Very good diversification

The 3 months correlation between Transport and Vulcan is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Transport International Holdin and Vulcan Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials and Transport International 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 Transport International Holdings are associated (or correlated) with Vulcan Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Materials has no effect on the direction of Transport International i.e., Transport International and Vulcan Materials go up and down completely randomly.

Pair Corralation between Transport International and Vulcan Materials

Assuming the 90 days horizon Transport International Holdings is expected to generate 2.81 times more return on investment than Vulcan Materials. However, Transport International is 2.81 times more volatile than Vulcan Materials. It trades about 0.06 of its potential returns per unit of risk. Vulcan Materials is currently generating about 0.05 per unit of risk. If you would invest  44.00  in Transport International Holdings on September 30, 2024 and sell it today you would earn a total of  52.00  from holding Transport International Holdings or generate 118.18% return on investment over 90 days.

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

Transport International Holdin  vs.  Vulcan Materials

Transport International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transport International Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Transport International is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Vulcan Materials

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Vulcan Materials reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Transport International and Vulcan Materials

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

The idea behind Transport International Holdings and Vulcan Materials 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.