Correlation Between Holcim and CRH PLC

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

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

Diversification Opportunities for Holcim and CRH PLC

0.51

Correlation Coefficient

Holcim  CRH PLC

Very weak diversification

The 3 months correlation between Holcim and CRH is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Holcim 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 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 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 Holcim i.e., Holcim and CRH PLC go up and down completely randomly.

Pair Corralation between Holcim and CRH PLC

Assuming the 90 days horizon Holcim is expected to generate 1.19 times more return on investment than CRH PLC. However, Holcim is 1.19 times more volatile than CRH PLC ADR. It trades about 0.08 of its potential returns per unit of risk. CRH PLC ADR is currently generating about -0.03 per unit of risk. If you would invest  10,300  in Holcim on December 4, 2024 and sell it today you would earn a total of  865.00  from holding Holcim or generate 8.4% return on investment over 90 days.

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

Holcim  vs.  CRH PLC ADR

Holcim

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Holcim are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Holcim may actually be approaching a critical reversion point that can send shares even higher in April 2025.

CRH PLC ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days CRH PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Holcim and CRH PLC

The main advantage of trading using opposite Holcim and CRH PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Holcim 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 Holcim 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.