Correlation Between James Hardie and HeidelbergCement
Can any of the company-specific risk be diversified away by investing in both James Hardie and HeidelbergCement 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 James Hardie and HeidelbergCement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between James Hardie Industries and HeidelbergCement AG ADR, you can compare the effects of market volatilities on James Hardie and HeidelbergCement 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 James Hardie with a short position of HeidelbergCement. Check out your portfolio center. Please also check ongoing floating volatility patterns of James Hardie and HeidelbergCement.
Diversification Opportunities for James Hardie and HeidelbergCement
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between James and HeidelbergCement is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding James Hardie Industries and HeidelbergCement AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HeidelbergCement AG ADR and James Hardie 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 James Hardie Industries are associated (or correlated) with HeidelbergCement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HeidelbergCement AG ADR has no effect on the direction of James Hardie i.e., James Hardie and HeidelbergCement go up and down completely randomly.
Pair Corralation between James Hardie and HeidelbergCement
Considering the 90-day investment horizon James Hardie is expected to generate 1.08 times less return on investment than HeidelbergCement. In addition to that, James Hardie is 1.38 times more volatile than HeidelbergCement AG ADR. It trades about 0.21 of its total potential returns per unit of risk. HeidelbergCement AG ADR is currently generating about 0.31 per unit of volatility. If you would invest 2,190 in HeidelbergCement AG ADR on August 31, 2024 and sell it today you would earn a total of 297.00 from holding HeidelbergCement AG ADR or generate 13.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
James Hardie Industries vs. HeidelbergCement AG ADR
Performance |
| Timeline |
| James Hardie Industries |
| HeidelbergCement AG ADR |
James Hardie and HeidelbergCement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with James Hardie and HeidelbergCement
The main advantage of trading using opposite James Hardie and HeidelbergCement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if James Hardie position performs unexpectedly, HeidelbergCement 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 HeidelbergCement will offset losses from the drop in HeidelbergCement's long position.| James Hardie vs. Loma Negra Compania | James Hardie vs. Summit Materials | James Hardie vs. United States Lime | James Hardie vs. Eagle Materials |
| HeidelbergCement vs. Anhui Conch Cement | HeidelbergCement vs. Holcim | HeidelbergCement vs. Buzzi Unicem SpA | HeidelbergCement vs. Wienerberger Baustoffindustrie |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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