Correlation Between Compagnie and Heidelberg Materials
Can any of the company-specific risk be diversified away by investing in both Compagnie 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 Compagnie and Heidelberg Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compagnie de Saint Gobain and Heidelberg Materials AG, you can compare the effects of market volatilities on Compagnie 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 Compagnie with a short position of Heidelberg Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compagnie and Heidelberg Materials.
Diversification Opportunities for Compagnie and Heidelberg Materials
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Compagnie and Heidelberg is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie de Saint Gobain and Heidelberg Materials AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heidelberg Materials and Compagnie 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 Compagnie de Saint Gobain 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 Compagnie i.e., Compagnie and Heidelberg Materials go up and down completely randomly.
Pair Corralation between Compagnie and Heidelberg Materials
Assuming the 90 days horizon Compagnie is expected to generate 2.13 times less return on investment than Heidelberg Materials. But when comparing it to its historical volatility, Compagnie de Saint Gobain is 1.05 times less risky than Heidelberg Materials. It trades about 0.08 of its potential returns per unit of risk. Heidelberg Materials AG is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 9,876 in Heidelberg Materials AG on October 26, 2024 and sell it today you would earn a total of 3,579 from holding Heidelberg Materials AG or generate 36.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compagnie de Saint Gobain vs. Heidelberg Materials AG
Performance |
| Timeline |
| Compagnie de Saint |
| Heidelberg Materials |
Compagnie and Heidelberg Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compagnie and Heidelberg Materials
The main advantage of trading using opposite Compagnie and Heidelberg Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compagnie 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.| Compagnie vs. BJs Restaurants | Compagnie vs. North American Construction | Compagnie vs. Nufarm Limited | Compagnie vs. JAPAN TOBACCO UNSPADR12 |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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