Correlation Between United States and James Hardie

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

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

Diversification Opportunities for United States and James Hardie

0.34

Correlation Coefficient

United States  James Hardie

Weak diversification

The 3 months correlation between United and James is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding United States Lime and James Hardie Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on James Hardie Industries and United States 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 United States Lime are associated (or correlated) with James Hardie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of James Hardie Industries has no effect on the direction of United States i.e., United States and James Hardie go up and down completely randomly.

Pair Corralation between United States and James Hardie

Given the investment horizon of 90 days United States Lime is expected to under-perform the James Hardie. But the stock apears to be less risky and, when comparing its historical volatility, United States Lime is 1.18 times less risky than James Hardie. The stock trades about -0.25 of its potential returns per unit of risk. The James Hardie Industries is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  3,087  in James Hardie Industries on December 28, 2024 and sell it today you would lose (623.00) from holding James Hardie Industries or give up 20.18% of portfolio value over 90 days.

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

United States Lime  vs.  James Hardie Industries

United States Lime

Risk-Adjusted Performance

Very Weak

Over the last 90 days United States Lime has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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.

Pair Trading with United States and James Hardie

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

The idea behind United States Lime and James Hardie Industries 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.