Correlation Between VULCAN MATERIALS and Mitsubishi Materials

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

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

Diversification Opportunities for VULCAN MATERIALS and Mitsubishi Materials

-0.54

Correlation Coefficient

VULCAN MATERIALS  Mitsubishi Materials

Excellent diversification

The 3 months correlation between VULCAN and Mitsubishi is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding VULCAN MATERIALS and Mitsubishi Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Materials 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 Mitsubishi Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Materials has no effect on the direction of VULCAN MATERIALS i.e., VULCAN MATERIALS and Mitsubishi Materials go up and down completely randomly.

Pair Corralation between VULCAN MATERIALS and Mitsubishi Materials

Assuming the 90 days trading horizon VULCAN MATERIALS is expected to generate 1.61 times more return on investment than Mitsubishi Materials. However, VULCAN MATERIALS is 1.61 times more volatile than Mitsubishi Materials. It trades about 0.26 of its potential returns per unit of risk. Mitsubishi Materials is currently generating about -0.09 per unit of risk. If you would invest  21,760  in VULCAN MATERIALS on September 4, 2024 and sell it today you would earn a total of  5,440  from holding VULCAN MATERIALS or generate 25.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.67%
Values	Daily Returns

VULCAN MATERIALS  vs.  Mitsubishi Materials

VULCAN MATERIALS

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in VULCAN MATERIALS are ranked lower than 18 (%) 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.

Mitsubishi Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsubishi Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking indicators, Mitsubishi Materials is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with VULCAN MATERIALS and Mitsubishi Materials

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

The idea behind VULCAN MATERIALS and Mitsubishi 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.