Correlation Between Heidelberg Materials and HALSTEAD JAMES

Can any of the company-specific risk be diversified away by investing in both Heidelberg Materials and HALSTEAD JAMES 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 HALSTEAD JAMES 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 HALSTEAD JAMES LS 05, you can compare the effects of market volatilities on Heidelberg Materials and HALSTEAD JAMES 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 HALSTEAD JAMES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heidelberg Materials and HALSTEAD JAMES.

Diversification Opportunities for Heidelberg Materials and HALSTEAD JAMES

0.73

Correlation Coefficient

Heidelberg Materials  HALSTEAD JAMES

Poor diversification

The 3 months correlation between Heidelberg and HALSTEAD is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Heidelberg Materials AG and HALSTEAD JAMES LS 05 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HALSTEAD JAMES LS 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 HALSTEAD JAMES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HALSTEAD JAMES LS has no effect on the direction of Heidelberg Materials i.e., Heidelberg Materials and HALSTEAD JAMES go up and down completely randomly.

Pair Corralation between Heidelberg Materials and HALSTEAD JAMES

Assuming the 90 days trading horizon Heidelberg Materials AG is expected to generate 0.69 times more return on investment than HALSTEAD JAMES. However, Heidelberg Materials AG is 1.46 times less risky than HALSTEAD JAMES. It trades about 0.19 of its potential returns per unit of risk. HALSTEAD JAMES LS 05 is currently generating about 0.09 per unit of risk. If you would invest  9,778  in Heidelberg Materials AG on September 22, 2024 and sell it today you would earn a total of  2,117  from holding Heidelberg Materials AG or generate 21.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.48%
Values	Daily Returns

Heidelberg Materials AG  vs.  HALSTEAD JAMES LS 05

Heidelberg Materials

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Heidelberg Materials AG are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Heidelberg Materials unveiled solid returns over the last few months and may actually be approaching a breakup point.

HALSTEAD JAMES LS

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HALSTEAD JAMES LS 05 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward-looking indicators, HALSTEAD JAMES reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Heidelberg Materials and HALSTEAD JAMES

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

The idea behind Heidelberg Materials AG and HALSTEAD JAMES LS 05 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.