Correlation Between Lafargeholcim and James Hardie

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

Diversification Opportunities for Lafargeholcim and James Hardie

-0.39

Correlation Coefficient

Lafargeholcim  James Hardie

Very good diversification

The 3 months correlation between Lafargeholcim and James is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Lafargeholcim Ltd ADR and James Hardie Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on James Hardie Industries 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 James Hardie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of James Hardie Industries has no effect on the direction of Lafargeholcim i.e., Lafargeholcim and James Hardie go up and down completely randomly.

Pair Corralation between Lafargeholcim and James Hardie

Assuming the 90 days horizon Lafargeholcim Ltd ADR is expected to generate 0.56 times more return on investment than James Hardie. However, Lafargeholcim Ltd ADR is 1.79 times less risky than James Hardie. It trades about 0.13 of its potential returns per unit of risk. James Hardie Industries is currently generating about -0.11 per unit of risk. If you would invest  1,926  in Lafargeholcim Ltd ADR on December 30, 2024 and sell it today you would earn a total of  258.00  from holding Lafargeholcim Ltd ADR or generate 13.4% return on investment over 90 days.

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

Lafargeholcim Ltd ADR  vs.  James Hardie Industries

Lafargeholcim ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lafargeholcim Ltd ADR are ranked lower than 10 (%) 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.

James Hardie Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days James Hardie Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Lafargeholcim and James Hardie

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

The idea behind Lafargeholcim Ltd ADR and James Hardie Industries 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.