Correlation Between Zegona Communications and Vulcan Materials

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

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

Diversification Opportunities for Zegona Communications and Vulcan Materials

-0.59

Correlation Coefficient

Zegona Communications  Vulcan Materials

Excellent diversification

The 3 months correlation between Zegona and Vulcan is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Zegona Communications Plc and Vulcan Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials and Zegona Communications 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 Zegona Communications Plc are associated (or correlated) with Vulcan Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Materials has no effect on the direction of Zegona Communications i.e., Zegona Communications and Vulcan Materials go up and down completely randomly.

Pair Corralation between Zegona Communications and Vulcan Materials

Assuming the 90 days trading horizon Zegona Communications Plc is expected to under-perform the Vulcan Materials. In addition to that, Zegona Communications is 1.35 times more volatile than Vulcan Materials Co. It trades about -0.01 of its total potential returns per unit of risk. Vulcan Materials Co is currently generating about 0.15 per unit of volatility. If you would invest  23,922  in Vulcan Materials Co on September 14, 2024 and sell it today you would earn a total of  3,855  from holding Vulcan Materials Co or generate 16.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Zegona Communications Plc  vs.  Vulcan Materials Co

Zegona Communications Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zegona Communications Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Zegona Communications is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Vulcan Materials

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials Co are ranked lower than 11 (%) 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.

Pair Trading with Zegona Communications and Vulcan Materials

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

The idea behind Zegona Communications Plc and Vulcan Materials Co 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.