Correlation Between Heidelberg Materials and Heidelberg Pharma

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

Diversification Opportunities for Heidelberg Materials and Heidelberg Pharma

0.49

Correlation Coefficient

Heidelberg Materials  Heidelberg Pharma

Very weak diversification

The 3 months correlation between Heidelberg and Heidelberg is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Heidelberg Materials AG and Heidelberg Pharma AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heidelberg Pharma 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 Heidelberg Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heidelberg Pharma has no effect on the direction of Heidelberg Materials i.e., Heidelberg Materials and Heidelberg Pharma go up and down completely randomly.

Pair Corralation between Heidelberg Materials and Heidelberg Pharma

Assuming the 90 days trading horizon Heidelberg Materials AG is expected to generate 1.16 times more return on investment than Heidelberg Pharma. However, Heidelberg Materials is 1.16 times more volatile than Heidelberg Pharma AG. It trades about 0.21 of its potential returns per unit of risk. Heidelberg Pharma AG is currently generating about 0.12 per unit of risk. If you would invest  11,950  in Heidelberg Materials AG on December 26, 2024 and sell it today you would earn a total of  5,660  from holding Heidelberg Materials AG or generate 47.36% return on investment over 90 days.

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

Heidelberg Materials AG  vs.  Heidelberg Pharma AG

Heidelberg Materials

Risk-Adjusted Performance

Solid

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. In spite of comparatively unsteady forward indicators, Heidelberg Materials unveiled solid returns over the last few months and may actually be approaching a breakup point.

Heidelberg Pharma

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Heidelberg Pharma AG are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, Heidelberg Pharma exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Heidelberg Materials and Heidelberg Pharma

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

The idea behind Heidelberg Materials AG and Heidelberg Pharma 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.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.