Correlation Between Heidelberg Materials and NEW MILLENNIUM

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

By analyzing existing cross correlation between Heidelberg Materials AG and NEW MILLENNIUM IRON, you can compare the effects of market volatilities on Heidelberg Materials and NEW MILLENNIUM 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 Heidelberg Materials with a short position of NEW MILLENNIUM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heidelberg Materials and NEW MILLENNIUM.

Diversification Opportunities for Heidelberg Materials and NEW MILLENNIUM

0.58

Correlation Coefficient

Heidelberg Materials  NEW MILLENNIUM

Very weak diversification

The 3 months correlation between Heidelberg and NEW is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Heidelberg Materials AG and NEW MILLENNIUM IRON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEW MILLENNIUM IRON and Heidelberg Materials 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 Heidelberg Materials AG are associated (or correlated) with NEW MILLENNIUM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEW MILLENNIUM IRON has no effect on the direction of Heidelberg Materials i.e., Heidelberg Materials and NEW MILLENNIUM go up and down completely randomly.

Pair Corralation between Heidelberg Materials and NEW MILLENNIUM

Assuming the 90 days horizon Heidelberg Materials is expected to generate 3.08 times less return on investment than NEW MILLENNIUM. But when comparing it to its historical volatility, Heidelberg Materials AG is 6.52 times less risky than NEW MILLENNIUM. It trades about 0.11 of its potential returns per unit of risk. NEW MILLENNIUM IRON is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  185.00  in NEW MILLENNIUM IRON on October 10, 2024 and sell it today you would earn a total of  620.00  from holding NEW MILLENNIUM IRON or generate 335.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Heidelberg Materials AG  vs.  NEW MILLENNIUM IRON

Heidelberg Materials

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Heidelberg Materials AG are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Heidelberg Materials reported solid returns over the last few months and may actually be approaching a breakup point.

NEW MILLENNIUM IRON

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NEW MILLENNIUM IRON are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, NEW MILLENNIUM may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Heidelberg Materials and NEW MILLENNIUM

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

The idea behind Heidelberg Materials AG and NEW MILLENNIUM IRON 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.