Correlation Between James Hardie and Anhui Conch

Can any of the company-specific risk be diversified away by investing in both James Hardie 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 James Hardie and Anhui Conch into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between James Hardie Industries and Anhui Conch Cement, you can compare the effects of market volatilities on James Hardie 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 James Hardie with a short position of Anhui Conch. Check out your portfolio center. Please also check ongoing floating volatility patterns of James Hardie and Anhui Conch.

Diversification Opportunities for James Hardie and Anhui Conch

-0.23

Correlation Coefficient

James Hardie  Anhui Conch

Very good diversification

The 3 months correlation between James and Anhui is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding James Hardie Industries 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 James Hardie 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 James Hardie Industries 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 James Hardie i.e., James Hardie and Anhui Conch go up and down completely randomly.

Pair Corralation between James Hardie and Anhui Conch

Considering the 90-day investment horizon James Hardie Industries is expected to generate 0.45 times more return on investment than Anhui Conch. However, James Hardie Industries is 2.2 times less risky than Anhui Conch. It trades about 0.07 of its potential returns per unit of risk. Anhui Conch Cement is currently generating about 0.02 per unit of risk. If you would invest  1,792  in James Hardie Industries on September 13, 2024 and sell it today you would earn a total of  1,628  from holding James Hardie Industries or generate 90.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.74%
Values	Daily Returns

James Hardie Industries  vs.  Anhui Conch Cement

James Hardie Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days James Hardie Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, James Hardie is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Anhui Conch Cement

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Conch Cement are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, Anhui Conch reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with James Hardie and Anhui Conch

The main advantage of trading using opposite James Hardie and Anhui Conch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if James Hardie 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 James Hardie Industries 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..