Correlation Between Lafargeholcim and UltraTech Cement

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

Diversification Opportunities for Lafargeholcim and UltraTech Cement

0.0

Correlation Coefficient

Lafargeholcim  UltraTech Cement

Pay attention - limited upside

The 3 months correlation between Lafargeholcim and UltraTech is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Lafargeholcim Ltd ADR and UltraTech Cement Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UltraTech Cement 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 UltraTech Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UltraTech Cement has no effect on the direction of Lafargeholcim i.e., Lafargeholcim and UltraTech Cement go up and down completely randomly.

Pair Corralation between Lafargeholcim and UltraTech Cement

If you would invest  2,050  in Lafargeholcim Ltd ADR on December 4, 2024 and sell it today you would earn a total of  125.00  from holding Lafargeholcim Ltd ADR or generate 6.1% return on investment over 90 days.

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

Lafargeholcim Ltd ADR  vs.  UltraTech Cement Limited

Lafargeholcim ADR

Risk-Adjusted Performance

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 weak essential indicators, Lafargeholcim may actually be approaching a critical reversion point that can send shares even higher in April 2025.

UltraTech Cement

Risk-Adjusted Performance

Very Weak

Over the last 90 days UltraTech Cement Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, UltraTech Cement is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Lafargeholcim and UltraTech Cement

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

The idea behind Lafargeholcim Ltd ADR and UltraTech Cement Limited 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.