Correlation Between Basanite and Lafargeholcim
Can any of the company-specific risk be diversified away by investing in both Basanite and Lafargeholcim 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 Basanite and Lafargeholcim into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basanite and Lafargeholcim Ltd ADR, you can compare the effects of market volatilities on Basanite and Lafargeholcim 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 Basanite with a short position of Lafargeholcim. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basanite and Lafargeholcim.
Diversification Opportunities for Basanite and Lafargeholcim
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Basanite and Lafargeholcim is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Basanite and Lafargeholcim Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lafargeholcim ADR and Basanite 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 Basanite are associated (or correlated) with Lafargeholcim. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lafargeholcim ADR has no effect on the direction of Basanite i.e., Basanite and Lafargeholcim go up and down completely randomly.
Pair Corralation between Basanite and Lafargeholcim
Given the investment horizon of 90 days Basanite is expected to generate 13.58 times more return on investment than Lafargeholcim. However, Basanite is 13.58 times more volatile than Lafargeholcim Ltd ADR. It trades about 0.01 of its potential returns per unit of risk. Lafargeholcim Ltd ADR is currently generating about 0.06 per unit of risk. If you would invest 6.10 in Basanite on August 30, 2024 and sell it today you would lose (1.10) from holding Basanite or give up 18.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Basanite vs. Lafargeholcim Ltd ADR
Performance |
| Timeline |
| Basanite |
| Lafargeholcim ADR |
Basanite and Lafargeholcim Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Basanite and Lafargeholcim
The main advantage of trading using opposite Basanite and Lafargeholcim positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basanite position performs unexpectedly, Lafargeholcim 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 Lafargeholcim will offset losses from the drop in Lafargeholcim's long position.| Basanite vs. Xinyi Glass Holdings | Basanite vs. CEMATRIX | Basanite vs. Anhui Conch Cement | Basanite vs. CEMEX SAB de |
| Lafargeholcim vs. Anhui Conch Cement | Lafargeholcim vs. Buzzi Unicem SpA | Lafargeholcim vs. Wienerberger Baustoffindustrie | Lafargeholcim vs. China National Building |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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