Correlation Between Heidelberg Materials and TELECOM ITALRISP

Can any of the company-specific risk be diversified away by investing in both Heidelberg Materials and TELECOM ITALRISP 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 TELECOM ITALRISP 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 TELECOM ITALRISP ADR10, you can compare the effects of market volatilities on Heidelberg Materials and TELECOM ITALRISP 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 TELECOM ITALRISP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heidelberg Materials and TELECOM ITALRISP.

Diversification Opportunities for Heidelberg Materials and TELECOM ITALRISP

0.55

Correlation Coefficient

Heidelberg Materials  TELECOM ITALRISP

Very weak diversification

The 3 months correlation between Heidelberg and TELECOM is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Heidelberg Materials AG and TELECOM ITALRISP ADR10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TELECOM ITALRISP ADR10 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 TELECOM ITALRISP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TELECOM ITALRISP ADR10 has no effect on the direction of Heidelberg Materials i.e., Heidelberg Materials and TELECOM ITALRISP go up and down completely randomly.

Pair Corralation between Heidelberg Materials and TELECOM ITALRISP

Assuming the 90 days trading horizon Heidelberg Materials AG is expected to generate 1.37 times more return on investment than TELECOM ITALRISP. However, Heidelberg Materials is 1.37 times more volatile than TELECOM ITALRISP ADR10. It trades about 0.21 of its potential returns per unit of risk. TELECOM ITALRISP ADR10 is currently generating about 0.1 per unit of risk. If you would invest  12,000  in Heidelberg Materials AG on December 23, 2024 and sell it today you would earn a total of  5,480  from holding Heidelberg Materials AG or generate 45.67% 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.  TELECOM ITALRISP ADR10

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 fragile forward indicators, Heidelberg Materials unveiled solid returns over the last few months and may actually be approaching a breakup point.

TELECOM ITALRISP ADR10

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TELECOM ITALRISP ADR10 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, TELECOM ITALRISP reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Heidelberg Materials and TELECOM ITALRISP

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

The idea behind Heidelberg Materials AG and TELECOM ITALRISP ADR10 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.