Correlation Between VULCAN MATERIALS and Japan Real

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

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

Diversification Opportunities for VULCAN MATERIALS and Japan Real

-0.58

Correlation Coefficient

VULCAN MATERIALS  Japan Real

Excellent diversification

The 3 months correlation between VULCAN and Japan is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding VULCAN MATERIALS and Japan Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Real Estate 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 Japan Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Real Estate has no effect on the direction of VULCAN MATERIALS i.e., VULCAN MATERIALS and Japan Real go up and down completely randomly.

Pair Corralation between VULCAN MATERIALS and Japan Real

Assuming the 90 days trading horizon VULCAN MATERIALS is expected to generate 2.05 times more return on investment than Japan Real. However, VULCAN MATERIALS is 2.05 times more volatile than Japan Real Estate. It trades about 0.13 of its potential returns per unit of risk. Japan Real Estate is currently generating about -0.15 per unit of risk. If you would invest  22,558  in VULCAN MATERIALS on September 20, 2024 and sell it today you would earn a total of  3,642  from holding VULCAN MATERIALS or generate 16.15% return on investment over 90 days.

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

VULCAN MATERIALS  vs.  Japan Real Estate

VULCAN MATERIALS

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VULCAN MATERIALS are ranked lower than 10 (%) 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.

Japan Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Japan Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with VULCAN MATERIALS and Japan Real

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

The idea behind VULCAN MATERIALS and Japan Real Estate 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.