Correlation Between Heidelberg Materials and LIFENET INSURANCE

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

Diversification Opportunities for Heidelberg Materials and LIFENET INSURANCE

0.73

Correlation Coefficient

Heidelberg Materials  LIFENET INSURANCE

Poor diversification

The 3 months correlation between Heidelberg and LIFENET is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Heidelberg Materials AG and LIFENET INSURANCE CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIFENET INSURANCE 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 LIFENET INSURANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIFENET INSURANCE has no effect on the direction of Heidelberg Materials i.e., Heidelberg Materials and LIFENET INSURANCE go up and down completely randomly.

Pair Corralation between Heidelberg Materials and LIFENET INSURANCE

Assuming the 90 days horizon Heidelberg Materials AG is expected to generate 0.47 times more return on investment than LIFENET INSURANCE. However, Heidelberg Materials AG is 2.11 times less risky than LIFENET INSURANCE. It trades about 0.25 of its potential returns per unit of risk. LIFENET INSURANCE CO is currently generating about -0.13 per unit of risk. If you would invest  11,820  in Heidelberg Materials AG on September 17, 2024 and sell it today you would earn a total of  680.00  from holding Heidelberg Materials AG or generate 5.75% return on investment over 90 days.

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

Heidelberg Materials AG  vs.  LIFENET INSURANCE CO

Heidelberg Materials

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Heidelberg Materials AG are ranked lower than 21 (%) 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.

LIFENET INSURANCE

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LIFENET INSURANCE CO are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, LIFENET INSURANCE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Heidelberg Materials and LIFENET INSURANCE

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

The idea behind Heidelberg Materials AG and LIFENET INSURANCE CO 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.

Check out your portfolio center.

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 Stocks Directory module to find actively traded stocks across global markets.