Correlation Between HeidelbergCement and CEMATRIX

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

Diversification Opportunities for HeidelbergCement and CEMATRIX

-0.44

Correlation Coefficient

HeidelbergCement  CEMATRIX

Very good diversification

The 3 months correlation between HeidelbergCement and CEMATRIX is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding HeidelbergCement AG ADR and CEMATRIX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEMATRIX 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 CEMATRIX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEMATRIX has no effect on the direction of HeidelbergCement i.e., HeidelbergCement and CEMATRIX go up and down completely randomly.

Pair Corralation between HeidelbergCement and CEMATRIX

Assuming the 90 days horizon HeidelbergCement AG ADR is expected to generate 0.28 times more return on investment than CEMATRIX. However, HeidelbergCement AG ADR is 3.58 times less risky than CEMATRIX. It trades about 0.2 of its potential returns per unit of risk. CEMATRIX is currently generating about -0.01 per unit of risk. If you would invest  2,070  in HeidelbergCement AG ADR on September 3, 2024 and sell it today you would earn a total of  450.00  from holding HeidelbergCement AG ADR or generate 21.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

HeidelbergCement AG ADR  vs.  CEMATRIX

HeidelbergCement AG ADR

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HeidelbergCement AG ADR are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, HeidelbergCement showed solid returns over the last few months and may actually be approaching a breakup point.

CEMATRIX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CEMATRIX has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CEMATRIX is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with HeidelbergCement and CEMATRIX

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

The idea behind HeidelbergCement AG ADR and CEMATRIX 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.