Correlation Between Vulcan Minerals and Graphite One

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

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

Diversification Opportunities for Vulcan Minerals and Graphite One

0.34

Correlation Coefficient

Vulcan Minerals  Graphite One

Weak diversification

The 3 months correlation between Vulcan and Graphite is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Minerals and Graphite One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graphite One and Vulcan Minerals 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 Minerals are associated (or correlated) with Graphite One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graphite One has no effect on the direction of Vulcan Minerals i.e., Vulcan Minerals and Graphite One go up and down completely randomly.

Pair Corralation between Vulcan Minerals and Graphite One

Assuming the 90 days horizon Vulcan Minerals is expected to generate 3.5 times more return on investment than Graphite One. However, Vulcan Minerals is 3.5 times more volatile than Graphite One. It trades about 0.08 of its potential returns per unit of risk. Graphite One is currently generating about 0.03 per unit of risk. If you would invest  6.50  in Vulcan Minerals on August 31, 2024 and sell it today you would earn a total of  2.00  from holding Vulcan Minerals or generate 30.77% return on investment over 90 days.

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

Vulcan Minerals  vs.  Graphite One

Vulcan Minerals

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Minerals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Vulcan Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

Graphite One

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Graphite One are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Graphite One is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vulcan Minerals and Graphite One

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

The idea behind Vulcan Minerals and Graphite One 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.