Correlation Between James Hardie and Holcim

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

Diversification Opportunities for James Hardie and Holcim

0.03

Correlation Coefficient

James Hardie  Holcim

Significant diversification

The 3 months correlation between James and Holcim is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding James Hardie Industries and Holcim in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holcim 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 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 James Hardie i.e., James Hardie and Holcim go up and down completely randomly.

Pair Corralation between James Hardie and Holcim

Considering the 90-day investment horizon James Hardie is expected to generate 2.19 times less return on investment than Holcim. In addition to that, James Hardie is 1.38 times more volatile than Holcim. It trades about 0.03 of its total potential returns per unit of risk. Holcim is currently generating about 0.1 per unit of volatility. If you would invest  7,160  in Holcim on September 2, 2024 and sell it today you would earn a total of  3,000  from holding Holcim or generate 41.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	87.9%
Values	Daily Returns

James Hardie Industries  vs.  Holcim

James Hardie Industries

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in James Hardie Industries are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, James Hardie is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 James Hardie and Holcim

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

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.