Correlation Between EMS CHEMIE and Holcim AG

Can any of the company-specific risk be diversified away by investing in both EMS CHEMIE and Holcim AG 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 EMS CHEMIE and Holcim AG into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for EMS CHEMIE and Holcim AG

-0.57

Correlation Coefficient

EMS CHEMIE  Holcim AG

Excellent diversification

The 3 months correlation between EMS and Holcim is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding EMS CHEMIE HOLDING AG and Holcim AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holcim AG and EMS CHEMIE 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 EMS CHEMIE HOLDING AG are associated (or correlated) with Holcim AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holcim AG has no effect on the direction of EMS CHEMIE i.e., EMS CHEMIE and Holcim AG go up and down completely randomly.

Pair Corralation between EMS CHEMIE and Holcim AG

Assuming the 90 days trading horizon EMS CHEMIE HOLDING AG is expected to generate 0.62 times more return on investment than Holcim AG. However, EMS CHEMIE HOLDING AG is 1.6 times less risky than Holcim AG. It trades about 0.31 of its potential returns per unit of risk. Holcim AG is currently generating about 0.0 per unit of risk. If you would invest  60,850  in EMS CHEMIE HOLDING AG on October 22, 2024 and sell it today you would earn a total of  2,350  from holding EMS CHEMIE HOLDING AG or generate 3.86% return on investment over 90 days.

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

EMS CHEMIE HOLDING AG  vs.  Holcim AG

EMS CHEMIE HOLDING

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EMS CHEMIE HOLDING AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Holcim AG

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Holcim AG are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Holcim AG is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with EMS CHEMIE and Holcim AG

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

The idea behind EMS CHEMIE HOLDING AG and Holcim 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.

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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.