Correlation Between Vulcan Materials and Loma Negra

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

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

Diversification Opportunities for Vulcan Materials and Loma Negra

0.63

Correlation Coefficient

Vulcan Materials  Loma Negra

Poor diversification

The 3 months correlation between Vulcan and Loma is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials and Loma Negra Compania in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loma Negra Compania 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 Loma Negra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loma Negra Compania has no effect on the direction of Vulcan Materials i.e., Vulcan Materials and Loma Negra go up and down completely randomly.

Pair Corralation between Vulcan Materials and Loma Negra

Considering the 90-day investment horizon Vulcan Materials is expected to generate 0.49 times more return on investment than Loma Negra. However, Vulcan Materials is 2.02 times less risky than Loma Negra. It trades about -0.09 of its potential returns per unit of risk. Loma Negra Compania is currently generating about -0.1 per unit of risk. If you would invest  25,681  in Vulcan Materials on January 5, 2025 and sell it today you would lose (2,607) from holding Vulcan Materials or give up 10.15% of portfolio value over 90 days.

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

Vulcan Materials  vs.  Loma Negra Compania

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 latest weak performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Loma Negra Compania

Risk-Adjusted Performance

Very Weak

Over the last 90 days Loma Negra Compania has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's primary indicators remain somewhat strong which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Vulcan Materials and Loma Negra

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

The idea behind Vulcan Materials and Loma Negra Compania 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.