Correlation Between Lafargeholcim and Buzzi Unicem

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

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

Diversification Opportunities for Lafargeholcim and Buzzi Unicem

0.76

Correlation Coefficient

Lafargeholcim  Buzzi Unicem

Poor diversification

The 3 months correlation between Lafargeholcim and Buzzi is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Lafargeholcim Ltd ADR and Buzzi Unicem SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Buzzi Unicem SpA and Lafargeholcim 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 Lafargeholcim Ltd ADR are associated (or correlated) with Buzzi Unicem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Buzzi Unicem SpA has no effect on the direction of Lafargeholcim i.e., Lafargeholcim and Buzzi Unicem go up and down completely randomly.

Pair Corralation between Lafargeholcim and Buzzi Unicem

Assuming the 90 days horizon Lafargeholcim Ltd ADR is expected to generate 0.63 times more return on investment than Buzzi Unicem. However, Lafargeholcim Ltd ADR is 1.58 times less risky than Buzzi Unicem. It trades about 0.08 of its potential returns per unit of risk. Buzzi Unicem SpA is currently generating about 0.05 per unit of risk. If you would invest  1,912  in Lafargeholcim Ltd ADR on September 13, 2024 and sell it today you would earn a total of  107.00  from holding Lafargeholcim Ltd ADR or generate 5.6% return on investment over 90 days.

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

Lafargeholcim Ltd ADR  vs.  Buzzi Unicem SpA

Lafargeholcim ADR

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lafargeholcim Ltd ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Lafargeholcim is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Buzzi Unicem SpA

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Buzzi Unicem SpA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Buzzi Unicem is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lafargeholcim and Buzzi Unicem

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

The idea behind Lafargeholcim Ltd ADR and Buzzi Unicem SpA 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.