Correlation Between Cemex SAB and James Hardie

Can any of the company-specific risk be diversified away by investing in both Cemex SAB and James Hardie 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 Cemex SAB and James Hardie into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cemex SAB de and James Hardie Industries, you can compare the effects of market volatilities on Cemex SAB and James Hardie 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 Cemex SAB with a short position of James Hardie. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cemex SAB and James Hardie.

Diversification Opportunities for Cemex SAB and James Hardie

0.62

Correlation Coefficient

Cemex SAB  James Hardie

Poor diversification

The 3 months correlation between Cemex and James is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Cemex SAB de and James Hardie Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on James Hardie Industries and Cemex SAB 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 Cemex SAB de are associated (or correlated) with James Hardie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of James Hardie Industries has no effect on the direction of Cemex SAB i.e., Cemex SAB and James Hardie go up and down completely randomly.

Pair Corralation between Cemex SAB and James Hardie

Allowing for the 90-day total investment horizon Cemex SAB de is expected to generate 1.34 times more return on investment than James Hardie. However, Cemex SAB is 1.34 times more volatile than James Hardie Industries. It trades about 0.06 of its potential returns per unit of risk. James Hardie Industries is currently generating about -0.19 per unit of risk. If you would invest  548.00  in Cemex SAB de on September 18, 2024 and sell it today you would earn a total of  11.00  from holding Cemex SAB de or generate 2.01% return on investment over 90 days.

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

Cemex SAB de  vs.  James Hardie Industries

Cemex SAB de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cemex SAB de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

James Hardie Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days James Hardie Industries has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Cemex SAB and James Hardie

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

The idea behind Cemex SAB de and James Hardie Industries 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.