Correlation Between Metals Exploration and Vulcan Materials

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

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

Diversification Opportunities for Metals Exploration and Vulcan Materials

0.37

Correlation Coefficient

Metals Exploration  Vulcan Materials

Weak diversification

The 3 months correlation between Metals and Vulcan is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Metals Exploration Plc and Vulcan Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials and Metals Exploration 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 Metals Exploration Plc 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 Metals Exploration i.e., Metals Exploration and Vulcan Materials go up and down completely randomly.

Pair Corralation between Metals Exploration and Vulcan Materials

Assuming the 90 days trading horizon Metals Exploration Plc is expected to under-perform the Vulcan Materials. In addition to that, Metals Exploration is 1.96 times more volatile than Vulcan Materials Co. It trades about -0.13 of its total potential returns per unit of risk. Vulcan Materials Co is currently generating about -0.23 per unit of volatility. If you would invest  28,660  in Vulcan Materials Co on September 28, 2024 and sell it today you would lose (2,246) from holding Vulcan Materials Co or give up 7.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Metals Exploration Plc  vs.  Vulcan Materials Co

Metals Exploration Plc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Metals Exploration Plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Metals Exploration may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Metals Exploration and Vulcan Materials

The main advantage of trading using opposite Metals Exploration and Vulcan Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metals Exploration 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 Metals Exploration Plc and Vulcan Materials Co 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.