Correlation Between Heidelberg Materials and WHIRLPOOL

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Can any of the company-specific risk be diversified away by investing in both Heidelberg Materials and WHIRLPOOL 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 Heidelberg Materials and WHIRLPOOL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Heidelberg Materials AG and WHIRLPOOL, you can compare the effects of market volatilities on Heidelberg Materials and WHIRLPOOL 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 Heidelberg Materials with a short position of WHIRLPOOL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heidelberg Materials and WHIRLPOOL.

Diversification Opportunities for Heidelberg Materials and WHIRLPOOL

0.92
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Heidelberg and WHIRLPOOL is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Heidelberg Materials AG and WHIRLPOOL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WHIRLPOOL and Heidelberg 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 Heidelberg Materials AG are associated (or correlated) with WHIRLPOOL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WHIRLPOOL has no effect on the direction of Heidelberg Materials i.e., Heidelberg Materials and WHIRLPOOL go up and down completely randomly.

Pair Corralation between Heidelberg Materials and WHIRLPOOL

Assuming the 90 days horizon Heidelberg Materials is expected to generate 2.96 times less return on investment than WHIRLPOOL. But when comparing it to its historical volatility, Heidelberg Materials AG is 3.12 times less risky than WHIRLPOOL. It trades about 0.27 of its potential returns per unit of risk. WHIRLPOOL is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  10,212  in WHIRLPOOL on September 13, 2024 and sell it today you would earn a total of  1,723  from holding WHIRLPOOL or generate 16.87% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Heidelberg Materials AG  vs.  WHIRLPOOL

 Performance 
       Timeline  
Heidelberg Materials 

Risk-Adjusted Performance

22 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Heidelberg Materials AG are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Heidelberg Materials reported solid returns over the last few months and may actually be approaching a breakup point.
WHIRLPOOL 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in WHIRLPOOL are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, WHIRLPOOL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Heidelberg Materials and WHIRLPOOL Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Heidelberg Materials and WHIRLPOOL

The main advantage of trading using opposite Heidelberg Materials and WHIRLPOOL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heidelberg Materials position performs unexpectedly, WHIRLPOOL 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 WHIRLPOOL will offset losses from the drop in WHIRLPOOL's long position.
The idea behind Heidelberg Materials AG and WHIRLPOOL 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.
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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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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