Correlation Between Vulcan Materials and Monarch Cement

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

By analyzing existing cross correlation between Vulcan Materials and The Monarch Cement, you can compare the effects of market volatilities on Vulcan Materials and Monarch Cement 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 Monarch Cement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vulcan Materials and Monarch Cement.

Diversification Opportunities for Vulcan Materials and Monarch Cement

0.82

Correlation Coefficient

Vulcan Materials  Monarch Cement

Very poor diversification

The 3 months correlation between Vulcan and Monarch is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials and The Monarch Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monarch Cement 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 Monarch Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monarch Cement has no effect on the direction of Vulcan Materials i.e., Vulcan Materials and Monarch Cement go up and down completely randomly.

Pair Corralation between Vulcan Materials and Monarch Cement

Considering the 90-day investment horizon Vulcan Materials is expected to generate 0.74 times more return on investment than Monarch Cement. However, Vulcan Materials is 1.36 times less risky than Monarch Cement. It trades about 0.21 of its potential returns per unit of risk. The Monarch Cement is currently generating about 0.15 per unit of risk. If you would invest  23,443  in Vulcan Materials on September 4, 2024 and sell it today you would earn a total of  5,207  from holding Vulcan Materials or generate 22.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Vulcan Materials  vs.  The Monarch Cement

Vulcan Materials

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, Vulcan Materials exhibited solid returns over the last few months and may actually be approaching a breakup point.

Monarch Cement

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Monarch Cement are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Monarch Cement displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vulcan Materials and Monarch Cement

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

The idea behind Vulcan Materials and The Monarch Cement 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.