Correlation Between HeidelbergCement and Lafargeholcim
Can any of the company-specific risk be diversified away by investing in both HeidelbergCement 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 HeidelbergCement and Lafargeholcim into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HeidelbergCement AG ADR and Lafargeholcim Ltd ADR, you can compare the effects of market volatilities on HeidelbergCement 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 HeidelbergCement with a short position of Lafargeholcim. Check out your portfolio center. Please also check ongoing floating volatility patterns of HeidelbergCement and Lafargeholcim.
Diversification Opportunities for HeidelbergCement and Lafargeholcim
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between HeidelbergCement and Lafargeholcim is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding HeidelbergCement AG ADR and Lafargeholcim Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lafargeholcim ADR and HeidelbergCement 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 HeidelbergCement AG ADR 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 HeidelbergCement i.e., HeidelbergCement and Lafargeholcim go up and down completely randomly.
Pair Corralation between HeidelbergCement and Lafargeholcim
Assuming the 90 days horizon HeidelbergCement AG ADR is expected to generate 1.7 times more return on investment than Lafargeholcim. However, HeidelbergCement is 1.7 times more volatile than Lafargeholcim Ltd ADR. It trades about 0.32 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 2,175 in HeidelbergCement AG ADR on August 30, 2024 and sell it today you would earn a total of 312.00 from holding HeidelbergCement AG ADR or generate 14.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
HeidelbergCement AG ADR vs. Lafargeholcim Ltd ADR
Performance |
| Timeline |
| HeidelbergCement AG ADR |
| Lafargeholcim ADR |
HeidelbergCement and Lafargeholcim Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HeidelbergCement and Lafargeholcim
The main advantage of trading using opposite HeidelbergCement and Lafargeholcim positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HeidelbergCement 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.| HeidelbergCement vs. Xinyi Glass Holdings | HeidelbergCement vs. CEMATRIX | HeidelbergCement vs. CEMEX SAB de | HeidelbergCement vs. China National Building |
| 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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