Correlation Between Tatton Asset and Vulcan Materials

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

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

Diversification Opportunities for Tatton Asset and Vulcan Materials

0.4

Correlation Coefficient

Tatton Asset  Vulcan Materials

Very weak diversification

The 3 months correlation between Tatton and Vulcan is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Tatton Asset Management and Vulcan Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials and Tatton Asset 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 Tatton Asset Management 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 Tatton Asset i.e., Tatton Asset and Vulcan Materials go up and down completely randomly.

Pair Corralation between Tatton Asset and Vulcan Materials

Assuming the 90 days trading horizon Tatton Asset Management is expected to under-perform the Vulcan Materials. But the stock apears to be less risky and, when comparing its historical volatility, Tatton Asset Management is 1.03 times less risky than Vulcan Materials. The stock trades about -0.02 of its potential returns per unit of risk. The Vulcan Materials Co is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  24,040  in Vulcan Materials Co on September 3, 2024 and sell it today you would earn a total of  4,653  from holding Vulcan Materials Co or generate 19.36% return on investment over 90 days.

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

Tatton Asset Management  vs.  Vulcan Materials Co

Tatton Asset Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tatton Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Tatton Asset is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Vulcan Materials

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Vulcan Materials unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tatton Asset and Vulcan Materials

The main advantage of trading using opposite Tatton Asset and Vulcan Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tatton Asset 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 Tatton Asset Management 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.