Correlation Between Compagnie and HeidelbergCement

Can any of the company-specific risk be diversified away by investing in both Compagnie 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 Compagnie and HeidelbergCement 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 HeidelbergCement AG, you can compare the effects of market volatilities on Compagnie 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 Compagnie with a short position of HeidelbergCement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compagnie and HeidelbergCement.

Diversification Opportunities for Compagnie and HeidelbergCement

0.89

Correlation Coefficient

Compagnie  HeidelbergCement

Very poor diversification

The 3 months correlation between Compagnie and HeidelbergCement is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie de Saint Gobain and HeidelbergCement AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HeidelbergCement 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 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 has no effect on the direction of Compagnie i.e., Compagnie and HeidelbergCement go up and down completely randomly.

Pair Corralation between Compagnie and HeidelbergCement

Assuming the 90 days horizon Compagnie is expected to generate 2.66 times less return on investment than HeidelbergCement. But when comparing it to its historical volatility, Compagnie de Saint Gobain is 1.06 times less risky than HeidelbergCement. It trades about 0.1 of its potential returns per unit of risk. HeidelbergCement AG is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  9,450  in HeidelbergCement AG on September 3, 2024 and sell it today you would earn a total of  2,490  from holding HeidelbergCement AG or generate 26.35% return on investment over 90 days.

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

Compagnie de Saint Gobain  vs.  HeidelbergCement AG

Compagnie de Saint

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie de Saint Gobain are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Compagnie may actually be approaching a critical reversion point that can send shares even higher in January 2025.

HeidelbergCement

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HeidelbergCement AG are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile forward indicators, HeidelbergCement unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compagnie and HeidelbergCement

The main advantage of trading using opposite Compagnie and HeidelbergCement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compagnie 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.

The idea behind Compagnie de Saint Gobain and HeidelbergCement AG 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.