Correlation Between Lafargeholcim and CRH PLC

Can any of the company-specific risk be diversified away by investing in both Lafargeholcim 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 Lafargeholcim and CRH PLC 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 CRH PLC ADR, you can compare the effects of market volatilities on Lafargeholcim 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 Lafargeholcim with a short position of CRH PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lafargeholcim and CRH PLC.

Diversification Opportunities for Lafargeholcim and CRH PLC

0.42

Correlation Coefficient

Lafargeholcim  CRH PLC

Very weak diversification

The 3 months correlation between Lafargeholcim and CRH is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Lafargeholcim Ltd ADR 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 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 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 Lafargeholcim i.e., Lafargeholcim and CRH PLC go up and down completely randomly.

Pair Corralation between Lafargeholcim and CRH PLC

Assuming the 90 days horizon Lafargeholcim Ltd ADR is expected to generate 0.76 times more return on investment than CRH PLC. However, Lafargeholcim Ltd ADR is 1.32 times less risky than CRH PLC. It trades about 0.17 of its potential returns per unit of risk. CRH PLC ADR is currently generating about 0.05 per unit of risk. If you would invest  1,933  in Lafargeholcim Ltd ADR on December 27, 2024 and sell it today you would earn a total of  327.00  from holding Lafargeholcim Ltd ADR or generate 16.92% return on investment over 90 days.

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

Lafargeholcim Ltd ADR  vs.  CRH PLC ADR

Lafargeholcim ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lafargeholcim Ltd ADR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Lafargeholcim showed solid returns over the last few months and may actually be approaching a breakup point.

CRH PLC ADR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CRH PLC ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, CRH PLC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Lafargeholcim and CRH PLC

The main advantage of trading using opposite Lafargeholcim and CRH PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lafargeholcim 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 Lafargeholcim Ltd ADR 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..