Correlation Between HeidelbergCement and NYSE Composite
Can any of the company-specific risk be diversified away by investing in both HeidelbergCement and NYSE Composite 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 NYSE Composite 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 NYSE Composite, you can compare the effects of market volatilities on HeidelbergCement and NYSE Composite 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 NYSE Composite. Check out your portfolio center. Please also check ongoing floating volatility patterns of HeidelbergCement and NYSE Composite.
Diversification Opportunities for HeidelbergCement and NYSE Composite
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between HeidelbergCement and NYSE is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding HeidelbergCement AG ADR and NYSE Composite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NYSE Composite 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 NYSE Composite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NYSE Composite has no effect on the direction of HeidelbergCement i.e., HeidelbergCement and NYSE Composite go up and down completely randomly.
Pair Corralation between HeidelbergCement and NYSE Composite
Assuming the 90 days horizon HeidelbergCement AG ADR is expected to under-perform the NYSE Composite. In addition to that, HeidelbergCement is 1.97 times more volatile than NYSE Composite. It trades about -0.27 of its total potential returns per unit of risk. NYSE Composite is currently generating about -0.22 per unit of volatility. If you would invest 1,821,619 in NYSE Composite on February 1, 2024 and sell it today you would lose (61,285) from holding NYSE Composite or give up 3.36% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
HeidelbergCement AG ADR vs. NYSE Composite
Performance |
Timeline |
HeidelbergCement and NYSE Composite Volatility Contrast
Predicted Return Density |
Returns |
HeidelbergCement AG ADR
Pair trading matchups for HeidelbergCement
NYSE Composite
Pair trading matchups for NYSE Composite
Pair Trading with HeidelbergCement and NYSE Composite
The main advantage of trading using opposite HeidelbergCement and NYSE Composite positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HeidelbergCement position performs unexpectedly, NYSE Composite 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 NYSE Composite will offset losses from the drop in NYSE Composite's long position.HeidelbergCement vs. CRH PLC ADR | HeidelbergCement vs. Martin Marietta Materials | HeidelbergCement vs. Vulcan Materials | HeidelbergCement vs. James Hardie Industries |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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