Correlation Between Vulcan Energy and Victrex Plc

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

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

Diversification Opportunities for Vulcan Energy and Victrex Plc

-0.76

Correlation Coefficient

Vulcan Energy  Victrex Plc

Pay attention - limited upside

The 3 months correlation between Vulcan and Victrex is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Energy Resources and Victrex plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victrex plc and Vulcan Energy 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 Energy Resources are associated (or correlated) with Victrex Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victrex plc has no effect on the direction of Vulcan Energy i.e., Vulcan Energy and Victrex Plc go up and down completely randomly.

Pair Corralation between Vulcan Energy and Victrex Plc

Assuming the 90 days horizon Vulcan Energy Resources is expected to generate 2.37 times more return on investment than Victrex Plc. However, Vulcan Energy is 2.37 times more volatile than Victrex plc. It trades about 0.06 of its potential returns per unit of risk. Victrex plc is currently generating about 0.0 per unit of risk. If you would invest  266.00  in Vulcan Energy Resources on September 28, 2024 and sell it today you would earn a total of  25.00  from holding Vulcan Energy Resources or generate 9.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

Vulcan Energy Resources  vs.  Victrex plc

Vulcan Energy Resources

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Energy Resources are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Vulcan Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Victrex plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Victrex plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Victrex Plc is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vulcan Energy and Victrex Plc

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

The idea behind Vulcan Energy Resources and Victrex plc 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.