Correlation Between James Hardie and Monarch Cement

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

Diversification Opportunities for James Hardie and Monarch Cement

0.13

Correlation Coefficient

James Hardie  Monarch Cement

Average diversification

The 3 months correlation between James and Monarch is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding James Hardie Industries and The Monarch Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monarch 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 Monarch Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monarch Cement has no effect on the direction of James Hardie i.e., James Hardie and Monarch Cement go up and down completely randomly.

Pair Corralation between James Hardie and Monarch Cement

Considering the 90-day investment horizon James Hardie Industries is expected to under-perform the Monarch Cement. In addition to that, James Hardie is 2.64 times more volatile than The Monarch Cement. It trades about -0.11 of its total potential returns per unit of risk. The Monarch Cement is currently generating about 0.04 per unit of volatility. If you would invest  21,731  in The Monarch Cement on December 28, 2024 and sell it today you would earn a total of  469.00  from holding The Monarch Cement or generate 2.16% return on investment over 90 days.

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

James Hardie Industries  vs.  The Monarch Cement

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.

Monarch Cement

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Monarch Cement are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Monarch Cement is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with James Hardie and Monarch Cement

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

The idea behind James Hardie Industries and The Monarch 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.