Correlation Between Holcim and United States

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

By analyzing existing cross correlation between Holcim and United States Lime, you can compare the effects of market volatilities on Holcim and United States 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 United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Holcim and United States.

Diversification Opportunities for Holcim and United States

0.7

Correlation Coefficient

Holcim  United States

Poor diversification

The 3 months correlation between Holcim and United is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Holcim and United States Lime in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Lime 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Lime has no effect on the direction of Holcim i.e., Holcim and United States go up and down completely randomly.

Pair Corralation between Holcim and United States

Assuming the 90 days horizon Holcim is expected to generate 13.45 times less return on investment than United States. But when comparing it to its historical volatility, Holcim is 2.29 times less risky than United States. It trades about 0.06 of its potential returns per unit of risk. United States Lime is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  8,170  in United States Lime on August 30, 2024 and sell it today you would earn a total of  7,575  from holding United States Lime or generate 92.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Holcim  vs.  United States Lime

Holcim

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Holcim are ranked lower than 4 (%) 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.

United States Lime

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in United States Lime are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady essential indicators, United States displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Holcim and United States

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

The idea behind Holcim and United States Lime 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..