Correlation Between James Hardie and Lafargeholcim

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

Diversification Opportunities for James Hardie and Lafargeholcim

-0.39

Correlation Coefficient

James Hardie  Lafargeholcim

Very good diversification

The 3 months correlation between James and Lafargeholcim is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding James Hardie Industries and Lafargeholcim Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lafargeholcim ADR 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 Lafargeholcim. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lafargeholcim ADR has no effect on the direction of James Hardie i.e., James Hardie and Lafargeholcim go up and down completely randomly.

Pair Corralation between James Hardie and Lafargeholcim

Considering the 90-day investment horizon James Hardie Industries is expected to under-perform the Lafargeholcim. In addition to that, James Hardie is 1.79 times more volatile than Lafargeholcim Ltd ADR. It trades about -0.11 of its total potential returns per unit of risk. Lafargeholcim Ltd ADR is currently generating about 0.13 per unit of volatility. If you would invest  1,926  in Lafargeholcim Ltd ADR on December 30, 2024 and sell it today you would earn a total of  258.00  from holding Lafargeholcim Ltd ADR or generate 13.4% return on investment over 90 days.

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

James Hardie Industries  vs.  Lafargeholcim Ltd ADR

James Hardie Industries

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Lafargeholcim ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lafargeholcim Ltd ADR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Lafargeholcim showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with James Hardie and Lafargeholcim

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

The idea behind James Hardie Industries and Lafargeholcim Ltd ADR 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.