Correlation Between Heidelberg Materials and Commonwealth Bank

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

Diversification Opportunities for Heidelberg Materials and Commonwealth Bank

0.65

Correlation Coefficient

Heidelberg Materials  Commonwealth Bank

Poor diversification

The 3 months correlation between Heidelberg and Commonwealth is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Heidelberg Materials AG and Commonwealth Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Bank 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 Commonwealth Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commonwealth Bank has no effect on the direction of Heidelberg Materials i.e., Heidelberg Materials and Commonwealth Bank go up and down completely randomly.

Pair Corralation between Heidelberg Materials and Commonwealth Bank

Assuming the 90 days horizon Heidelberg Materials AG is expected to generate 3.44 times more return on investment than Commonwealth Bank. However, Heidelberg Materials is 3.44 times more volatile than Commonwealth Bank of. It trades about 0.11 of its potential returns per unit of risk. Commonwealth Bank of is currently generating about 0.06 per unit of risk. If you would invest  12,010  in Heidelberg Materials AG on December 2, 2024 and sell it today you would earn a total of  2,190  from holding Heidelberg Materials AG or generate 18.23% 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.  Commonwealth Bank of

Heidelberg Materials

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Heidelberg Materials AG are ranked lower than 7 (%) 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.

Commonwealth Bank

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Heidelberg Materials and Commonwealth Bank

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

The idea behind Heidelberg Materials AG and Commonwealth Bank of 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..