Correlation Between VULCAN MATERIALS and APPLIED MATERIALS

Can any of the company-specific risk be diversified away by investing in both VULCAN MATERIALS and APPLIED 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 APPLIED 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 APPLIED MATERIALS, you can compare the effects of market volatilities on VULCAN MATERIALS and APPLIED 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 APPLIED MATERIALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of VULCAN MATERIALS and APPLIED MATERIALS.

Diversification Opportunities for VULCAN MATERIALS and APPLIED MATERIALS

-0.39

Correlation Coefficient

VULCAN MATERIALS  APPLIED MATERIALS

Very good diversification

The 3 months correlation between VULCAN and APPLIED is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding VULCAN MATERIALS and APPLIED MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APPLIED 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 APPLIED MATERIALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APPLIED MATERIALS has no effect on the direction of VULCAN MATERIALS i.e., VULCAN MATERIALS and APPLIED MATERIALS go up and down completely randomly.

Pair Corralation between VULCAN MATERIALS and APPLIED MATERIALS

Assuming the 90 days trading horizon VULCAN MATERIALS is expected to generate 14.78 times less return on investment than APPLIED MATERIALS. But when comparing it to its historical volatility, VULCAN MATERIALS is 1.45 times less risky than APPLIED MATERIALS. It trades about 0.01 of its potential returns per unit of risk. APPLIED MATERIALS is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  13,617  in APPLIED MATERIALS on May 4, 2025 and sell it today you would earn a total of  1,941  from holding APPLIED MATERIALS or generate 14.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

VULCAN MATERIALS  vs.  APPLIED MATERIALS

VULCAN MATERIALS

Risk-Adjusted Performance

Very Weak

Over the last 90 days VULCAN MATERIALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, VULCAN MATERIALS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

APPLIED MATERIALS

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in APPLIED MATERIALS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, APPLIED MATERIALS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VULCAN MATERIALS and APPLIED MATERIALS

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

The idea behind VULCAN MATERIALS and APPLIED 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.