Correlation Between Lafargeholcim and CEMEX SAB

Can any of the company-specific risk be diversified away by investing in both Lafargeholcim and CEMEX SAB 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 CEMEX SAB 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 CEMEX SAB de, you can compare the effects of market volatilities on Lafargeholcim and CEMEX SAB 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 CEMEX SAB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lafargeholcim and CEMEX SAB.

Diversification Opportunities for Lafargeholcim and CEMEX SAB

-0.49

Correlation Coefficient

Lafargeholcim  CEMEX SAB

Very good diversification

The 3 months correlation between Lafargeholcim and CEMEX is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Lafargeholcim Ltd ADR and CEMEX SAB de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEMEX SAB de 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 CEMEX SAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEMEX SAB de has no effect on the direction of Lafargeholcim i.e., Lafargeholcim and CEMEX SAB go up and down completely randomly.

Pair Corralation between Lafargeholcim and CEMEX SAB

Assuming the 90 days horizon Lafargeholcim Ltd ADR is expected to generate 0.35 times more return on investment than CEMEX SAB. However, Lafargeholcim Ltd ADR is 2.82 times less risky than CEMEX SAB. It trades about 0.06 of its potential returns per unit of risk. CEMEX SAB de is currently generating about -0.04 per unit of risk. If you would invest  1,931  in Lafargeholcim Ltd ADR on September 16, 2024 and sell it today you would earn a total of  83.00  from holding Lafargeholcim Ltd ADR or generate 4.3% return on investment over 90 days.

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

Lafargeholcim Ltd ADR  vs.  CEMEX SAB de

Lafargeholcim ADR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lafargeholcim Ltd ADR are ranked lower than 5 (%) 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.

CEMEX SAB de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CEMEX SAB de has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Lafargeholcim and CEMEX SAB

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

The idea behind Lafargeholcim Ltd ADR and CEMEX SAB de 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.