Correlation Between CRH PLC and Tecnoglass

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

Diversification Opportunities for CRH PLC and Tecnoglass

0.67

Correlation Coefficient

CRH PLC  Tecnoglass

Poor diversification

The 3 months correlation between CRH and Tecnoglass is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding CRH PLC ADR and Tecnoglass in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tecnoglass 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 Tecnoglass. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tecnoglass has no effect on the direction of CRH PLC i.e., CRH PLC and Tecnoglass go up and down completely randomly.

Pair Corralation between CRH PLC and Tecnoglass

Considering the 90-day investment horizon CRH PLC ADR is expected to under-perform the Tecnoglass. But the stock apears to be less risky and, when comparing its historical volatility, CRH PLC ADR is 2.07 times less risky than Tecnoglass. The stock trades about -0.1 of its potential returns per unit of risk. The Tecnoglass is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  7,385  in Tecnoglass on September 19, 2024 and sell it today you would earn a total of  1,071  from holding Tecnoglass or generate 14.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

CRH PLC ADR  vs.  Tecnoglass

CRH PLC ADR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CRH PLC ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, CRH PLC is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Tecnoglass

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tecnoglass are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent essential indicators, Tecnoglass unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CRH PLC and Tecnoglass

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

The idea behind CRH PLC ADR and Tecnoglass 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.