Correlation Between Townsquare Media and Heidelberg Materials

Can any of the company-specific risk be diversified away by investing in both Townsquare Media and Heidelberg Materials 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 Townsquare Media and Heidelberg Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Townsquare Media and Heidelberg Materials AG, you can compare the effects of market volatilities on Townsquare Media and Heidelberg Materials 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 Townsquare Media with a short position of Heidelberg Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Townsquare Media and Heidelberg Materials.

Diversification Opportunities for Townsquare Media and Heidelberg Materials

0.06

Correlation Coefficient

Townsquare Media  Heidelberg Materials

Significant diversification

The 3 months correlation between Townsquare and Heidelberg is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Townsquare Media and Heidelberg Materials AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heidelberg Materials and Townsquare Media 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 Townsquare Media are associated (or correlated) with Heidelberg Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heidelberg Materials has no effect on the direction of Townsquare Media i.e., Townsquare Media and Heidelberg Materials go up and down completely randomly.

Pair Corralation between Townsquare Media and Heidelberg Materials

Assuming the 90 days horizon Townsquare Media is expected to generate 1.5 times less return on investment than Heidelberg Materials. In addition to that, Townsquare Media is 1.77 times more volatile than Heidelberg Materials AG. It trades about 0.05 of its total potential returns per unit of risk. Heidelberg Materials AG is currently generating about 0.12 per unit of volatility. If you would invest  5,471  in Heidelberg Materials AG on October 11, 2024 and sell it today you would earn a total of  7,039  from holding Heidelberg Materials AG or generate 128.66% return on investment over 90 days.

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

Townsquare Media  vs.  Heidelberg Materials AG

Townsquare Media

Risk-Adjusted Performance

0 of 100

Very Weak

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

Heidelberg Materials

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Heidelberg Materials AG are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile forward indicators, Heidelberg Materials unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Townsquare Media and Heidelberg Materials

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

The idea behind Townsquare Media and Heidelberg Materials 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.

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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.