Correlation Between CRH PLC and Anhui Conch

Can any of the company-specific risk be diversified away by investing in both CRH PLC and Anhui Conch 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 CRH PLC and Anhui Conch into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CRH PLC ADR and Anhui Conch Cement, you can compare the effects of market volatilities on CRH PLC and Anhui Conch 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 CRH PLC with a short position of Anhui Conch. Check out your portfolio center. Please also check ongoing floating volatility patterns of CRH PLC and Anhui Conch.

Diversification Opportunities for CRH PLC and Anhui Conch

0.21

Correlation Coefficient

CRH PLC  Anhui Conch

Modest diversification

The 3 months correlation between CRH and Anhui is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding CRH PLC ADR and Anhui Conch Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Conch Cement and CRH PLC 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 CRH PLC ADR are associated (or correlated) with Anhui Conch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Conch Cement has no effect on the direction of CRH PLC i.e., CRH PLC and Anhui Conch go up and down completely randomly.

Pair Corralation between CRH PLC and Anhui Conch

Considering the 90-day investment horizon CRH PLC ADR is expected to under-perform the Anhui Conch. But the stock apears to be less risky and, when comparing its historical volatility, CRH PLC ADR is 3.03 times less risky than Anhui Conch. The stock trades about -0.07 of its potential returns per unit of risk. The Anhui Conch Cement is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,370  in Anhui Conch Cement on September 13, 2024 and sell it today you would lose (28.00) from holding Anhui Conch Cement or give up 2.04% of portfolio value over 90 days.

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

CRH PLC ADR  vs.  Anhui Conch Cement

CRH PLC ADR

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CRH PLC ADR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, CRH PLC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Anhui Conch Cement

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Conch Cement are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent technical indicators, Anhui Conch showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CRH PLC and Anhui Conch

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

The idea behind CRH PLC ADR and Anhui Conch Cement 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.