Correlation Between VULCAN MATERIALS and Plastic Omnium

Can any of the company-specific risk be diversified away by investing in both VULCAN MATERIALS and Plastic Omnium 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 Plastic Omnium into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between VULCAN MATERIALS and Plastic Omnium, you can compare the effects of market volatilities on VULCAN MATERIALS and Plastic Omnium 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 Plastic Omnium. Check out your portfolio center. Please also check ongoing floating volatility patterns of VULCAN MATERIALS and Plastic Omnium.

Diversification Opportunities for VULCAN MATERIALS and Plastic Omnium

0.19

Correlation Coefficient

VULCAN MATERIALS  Plastic Omnium

Average diversification

The 3 months correlation between VULCAN and Plastic is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding VULCAN MATERIALS and Plastic Omnium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plastic Omnium 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 are associated (or correlated) with Plastic Omnium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plastic Omnium has no effect on the direction of VULCAN MATERIALS i.e., VULCAN MATERIALS and Plastic Omnium go up and down completely randomly.

Pair Corralation between VULCAN MATERIALS and Plastic Omnium

Assuming the 90 days trading horizon VULCAN MATERIALS is expected to generate 0.67 times more return on investment than Plastic Omnium. However, VULCAN MATERIALS is 1.5 times less risky than Plastic Omnium. It trades about 0.18 of its potential returns per unit of risk. Plastic Omnium is currently generating about 0.02 per unit of risk. If you would invest  21,960  in VULCAN MATERIALS on August 31, 2024 and sell it today you would earn a total of  5,240  from holding VULCAN MATERIALS or generate 23.86% return on investment over 90 days.

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

VULCAN MATERIALS  vs.  Plastic Omnium

VULCAN MATERIALS

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VULCAN MATERIALS are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, VULCAN MATERIALS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Plastic Omnium

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Plastic Omnium are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Plastic Omnium 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 VULCAN MATERIALS and Plastic Omnium

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

The idea behind VULCAN MATERIALS and Plastic Omnium 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..