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, 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

0.79

Correlation Coefficient

Holcim  CRH Plc

Poor diversification

The 3 months correlation between Holcim and CRH is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Holcim and CRH Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CRH Plc 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 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

If you would invest  6,772  in Holcim on September 14, 2024 and sell it today you would earn a total of  3,544  from holding Holcim or generate 52.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	0.44%
Values	Daily Returns

Holcim  vs.  CRH Plc

Holcim

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Holcim are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Holcim is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

CRH Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CRH Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, CRH Plc is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.