Correlation Between Monarch Cement and Holcim

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

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

Diversification Opportunities for Monarch Cement and Holcim

0.51

Correlation Coefficient

Monarch Cement  Holcim

Very weak diversification

The 3 months correlation between Monarch and Holcim is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding The Monarch Cement and Holcim in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holcim and Monarch Cement 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 The Monarch Cement are associated (or correlated) with Holcim. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holcim has no effect on the direction of Monarch Cement i.e., Monarch Cement and Holcim go up and down completely randomly.

Pair Corralation between Monarch Cement and Holcim

Given the investment horizon of 90 days Monarch Cement is expected to generate 4.8 times less return on investment than Holcim. But when comparing it to its historical volatility, The Monarch Cement is 1.79 times less risky than Holcim. It trades about 0.04 of its potential returns per unit of risk. Holcim is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  9,785  in Holcim on December 29, 2024 and sell it today you would earn a total of  1,399  from holding Holcim or generate 14.3% return on investment over 90 days.

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

The Monarch Cement  vs.  Holcim

Monarch Cement

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Monarch Cement are ranked lower than 3 (%) 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.

Holcim

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Holcim are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Holcim reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monarch Cement and Holcim

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

The idea behind The Monarch Cement and Holcim 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.