Correlation Between Heidelberg Materials and Anhui Conch

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

Diversification Opportunities for Heidelberg Materials and Anhui Conch

-0.03

Correlation Coefficient

Heidelberg Materials  Anhui Conch

Good diversification

The 3 months correlation between Heidelberg and Anhui is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Heidelberg Materials AG and Anhui Conch Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Conch Cement 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 Anhui Conch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Conch Cement has no effect on the direction of Heidelberg Materials i.e., Heidelberg Materials and Anhui Conch go up and down completely randomly.

Pair Corralation between Heidelberg Materials and Anhui Conch

Assuming the 90 days trading horizon Heidelberg Materials AG is expected to generate 0.4 times more return on investment than Anhui Conch. However, Heidelberg Materials AG is 2.47 times less risky than Anhui Conch. It trades about 0.12 of its potential returns per unit of risk. Anhui Conch Cement is currently generating about 0.03 per unit of risk. If you would invest  9,458  in Heidelberg Materials AG on September 23, 2024 and sell it today you would earn a total of  2,462  from holding Heidelberg Materials AG or generate 26.03% return on investment over 90 days.

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

Heidelberg Materials AG  vs.  Anhui Conch Cement

Heidelberg Materials

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Heidelberg Materials AG are ranked lower than 15 (%) 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.

Anhui Conch Cement

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Conch Cement are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Anhui Conch reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Heidelberg Materials and Anhui Conch

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

The idea behind Heidelberg Materials AG and Anhui Conch Cement 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.