Correlation Between Heidelberg Materials and Gaming

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

Diversification Opportunities for Heidelberg Materials and Gaming

0.31

Correlation Coefficient

Heidelberg Materials  Gaming

Weak diversification

The 3 months correlation between Heidelberg and Gaming is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Heidelberg Materials AG and Gaming and Leisure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaming and Leisure 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 Gaming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaming and Leisure has no effect on the direction of Heidelberg Materials i.e., Heidelberg Materials and Gaming go up and down completely randomly.

Pair Corralation between Heidelberg Materials and Gaming

Assuming the 90 days trading horizon Heidelberg Materials AG is expected to generate 2.21 times more return on investment than Gaming. However, Heidelberg Materials is 2.21 times more volatile than Gaming and Leisure. It trades about 0.22 of its potential returns per unit of risk. Gaming and Leisure is currently generating about 0.07 per unit of risk. If you would invest  12,035  in Heidelberg Materials AG on December 23, 2024 and sell it today you would earn a total of  5,525  from holding Heidelberg Materials AG or generate 45.91% return on investment over 90 days.

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

Heidelberg Materials AG  vs.  Gaming and Leisure

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 17 (%) 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.

Gaming and Leisure

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gaming and Leisure are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Gaming is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Heidelberg Materials and Gaming

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

The idea behind Heidelberg Materials AG and Gaming and Leisure 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.