Correlation Between Holcim and China National

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

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

Diversification Opportunities for Holcim and China National

0.84

Correlation Coefficient

Holcim  China National

Very poor diversification

The 3 months correlation between Holcim and China is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Holcim and China National Building in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China National Building and Holcim 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 Holcim are associated (or correlated) with China National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China National Building has no effect on the direction of Holcim i.e., Holcim and China National go up and down completely randomly.

Pair Corralation between Holcim and China National

Assuming the 90 days horizon Holcim is expected to generate 0.66 times more return on investment than China National. However, Holcim is 1.52 times less risky than China National. It trades about 0.12 of its potential returns per unit of risk. China National Building is currently generating about 0.08 per unit of risk. If you would invest  9,785  in Holcim on December 28, 2024 and sell it today you would earn a total of  1,399  from holding Holcim or generate 14.3% return on investment over 90 days.

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

Holcim  vs.  China National Building

Holcim

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Holcim are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Holcim reported solid returns over the last few months and may actually be approaching a breakup point.

China National Building

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China National Building are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile primary indicators, China National showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Holcim and China National

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

The idea behind Holcim and China National Building 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.