Correlation Between Buzzi Unicem and Holcim

Can any of the company-specific risk be diversified away by investing in both Buzzi Unicem and Holcim 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 Buzzi Unicem and Holcim into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Buzzi Unicem SpA and Holcim, you can compare the effects of market volatilities on Buzzi Unicem and Holcim 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 Buzzi Unicem with a short position of Holcim. Check out your portfolio center. Please also check ongoing floating volatility patterns of Buzzi Unicem and Holcim.

Diversification Opportunities for Buzzi Unicem and Holcim

0.67

Correlation Coefficient

Buzzi Unicem  Holcim

Poor diversification

The 3 months correlation between Buzzi and Holcim is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Buzzi Unicem SpA and Holcim in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holcim and Buzzi Unicem 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 Buzzi Unicem SpA are associated (or correlated) with Holcim. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holcim has no effect on the direction of Buzzi Unicem i.e., Buzzi Unicem and Holcim go up and down completely randomly.

Pair Corralation between Buzzi Unicem and Holcim

Assuming the 90 days horizon Buzzi Unicem SpA is expected to generate 1.37 times more return on investment than Holcim. However, Buzzi Unicem is 1.37 times more volatile than Holcim. It trades about 0.07 of its potential returns per unit of risk. Holcim is currently generating about 0.06 per unit of risk. If you would invest  1,956  in Buzzi Unicem SpA on September 2, 2024 and sell it today you would earn a total of  142.00  from holding Buzzi Unicem SpA or generate 7.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Buzzi Unicem SpA  vs.  Holcim

Buzzi Unicem SpA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Buzzi Unicem SpA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Buzzi Unicem may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Holcim

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Holcim are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Holcim is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Buzzi Unicem and Holcim

The main advantage of trading using opposite Buzzi Unicem and Holcim positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Buzzi Unicem position performs unexpectedly, Holcim 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 Holcim will offset losses from the drop in Holcim's long position.

The idea behind Buzzi Unicem SpA and Holcim 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.