Correlation Between CEMEX SAB and CRH PLC

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

Diversification Opportunities for CEMEX SAB and CRH PLC

-0.69

Correlation Coefficient

CEMEX SAB  CRH PLC

Excellent diversification

The 3 months correlation between CEMEX and CRH is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding CEMEX SAB de and CRH PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CRH PLC ADR 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 CRH PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CRH PLC ADR has no effect on the direction of CEMEX SAB i.e., CEMEX SAB and CRH PLC go up and down completely randomly.

Pair Corralation between CEMEX SAB and CRH PLC

Assuming the 90 days horizon CEMEX SAB de is expected to under-perform the CRH PLC. In addition to that, CEMEX SAB is 2.75 times more volatile than CRH PLC ADR. It trades about -0.04 of its total potential returns per unit of risk. CRH PLC ADR is currently generating about 0.13 per unit of volatility. If you would invest  8,917  in CRH PLC ADR on September 16, 2024 and sell it today you would earn a total of  875.00  from holding CRH PLC ADR or generate 9.81% return on investment over 90 days.

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

CEMEX SAB de  vs.  CRH PLC ADR

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. Despite latest inconsistent performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

CRH PLC ADR

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CRH PLC ADR are ranked lower than 10 (%) 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.

Pair Trading with CEMEX SAB and CRH PLC

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

The idea behind CEMEX SAB de and CRH PLC ADR 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .