Correlation Between China Communications and Heidelberg Materials
Can any of the company-specific risk be diversified away by investing in both China Communications and Heidelberg 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 China Communications and Heidelberg Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Communications Services and Heidelberg Materials AG, you can compare the effects of market volatilities on China Communications and Heidelberg 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 China Communications with a short position of Heidelberg Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Communications and Heidelberg Materials.
Diversification Opportunities for China Communications and Heidelberg Materials
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between China and Heidelberg is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding China Communications Services and Heidelberg Materials AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heidelberg Materials and China 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 China Communications Services are associated (or correlated) with Heidelberg Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heidelberg Materials has no effect on the direction of China Communications i.e., China Communications and Heidelberg Materials go up and down completely randomly.
Pair Corralation between China Communications and Heidelberg Materials
Assuming the 90 days horizon China Communications Services is expected to generate 4.24 times more return on investment than Heidelberg Materials. However, China Communications is 4.24 times more volatile than Heidelberg Materials AG. It trades about 0.07 of its potential returns per unit of risk. Heidelberg Materials AG is currently generating about 0.16 per unit of risk. If you would invest 21.00 in China Communications Services on September 14, 2024 and sell it today you would earn a total of 30.00 from holding China Communications Services or generate 142.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Communications Services vs. Heidelberg Materials AG
Performance |
| Timeline |
| China Communications |
| Heidelberg Materials |
China Communications and Heidelberg Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Communications and Heidelberg Materials
The main advantage of trading using opposite China Communications and Heidelberg Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Communications position performs unexpectedly, Heidelberg 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 Heidelberg Materials will offset losses from the drop in Heidelberg Materials' long position.| China Communications vs. Superior Plus Corp | China Communications vs. SIVERS SEMICONDUCTORS AB | China Communications vs. Norsk Hydro ASA | China Communications vs. Reliance Steel Aluminum |
| Heidelberg Materials vs. Solstad Offshore ASA | Heidelberg Materials vs. MCEWEN MINING INC | Heidelberg Materials vs. DISTRICT METALS | Heidelberg Materials vs. ADRIATIC METALS LS 013355 |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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