Correlation Between Heidelberg Materials and Highlight Communications

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

Diversification Opportunities for Heidelberg Materials and Highlight Communications

0.63

Correlation Coefficient

Heidelberg Materials  Highlight Communications

Poor diversification

The 3 months correlation between Heidelberg and Highlight is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Heidelberg Materials AG and Highlight Communications AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highlight Communications 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 Highlight Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highlight Communications has no effect on the direction of Heidelberg Materials i.e., Heidelberg Materials and Highlight Communications go up and down completely randomly.

Pair Corralation between Heidelberg Materials and Highlight Communications

Assuming the 90 days horizon Heidelberg Materials AG is expected to generate 0.43 times more return on investment than Highlight Communications. However, Heidelberg Materials AG is 2.33 times less risky than Highlight Communications. It trades about 0.11 of its potential returns per unit of risk. Highlight Communications AG is currently generating about -0.12 per unit of risk. If you would invest  9,766  in Heidelberg Materials AG on September 27, 2024 and sell it today you would earn a total of  2,279  from holding Heidelberg Materials AG or generate 23.34% 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.  Highlight Communications AG

Heidelberg Materials

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Heidelberg Materials AG are ranked lower than 16 (%) 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.

Highlight Communications

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Highlight Communications AG are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Highlight Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Heidelberg Materials and Highlight Communications

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

The idea behind Heidelberg Materials AG and Highlight Communications AG 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.