Correlation Between Wienerberger Baustoffindustri and Lafargeholcim

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

By analyzing existing cross correlation between Wienerberger Baustoffindustrie and Lafargeholcim Ltd ADR, you can compare the effects of market volatilities on Wienerberger Baustoffindustri 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 Wienerberger Baustoffindustri with a short position of Lafargeholcim. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wienerberger Baustoffindustri and Lafargeholcim.

Diversification Opportunities for Wienerberger Baustoffindustri and Lafargeholcim

0.91

Correlation Coefficient

Wienerberger Baustoffindustri  Lafargeholcim

Almost no diversification

The 3 months correlation between Wienerberger and Lafargeholcim is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Wienerberger Baustoffindustrie and Lafargeholcim Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lafargeholcim ADR and Wienerberger Baustoffindustri 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 Wienerberger Baustoffindustrie 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 Wienerberger Baustoffindustri i.e., Wienerberger Baustoffindustri and Lafargeholcim go up and down completely randomly.

Pair Corralation between Wienerberger Baustoffindustri and Lafargeholcim

Assuming the 90 days horizon Wienerberger Baustoffindustrie is expected to generate 2.2 times more return on investment than Lafargeholcim. However, Wienerberger Baustoffindustri is 2.2 times more volatile than Lafargeholcim Ltd ADR. It trades about 0.09 of its potential returns per unit of risk. Lafargeholcim Ltd ADR is currently generating about 0.05 per unit of risk. If you would invest  556.00  in Wienerberger Baustoffindustrie on November 28, 2024 and sell it today you would earn a total of  71.00  from holding Wienerberger Baustoffindustrie or generate 12.77% return on investment over 90 days.

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

Wienerberger Baustoffindustrie  vs.  Lafargeholcim Ltd ADR

Wienerberger Baustoffindustri

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wienerberger Baustoffindustrie are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Wienerberger Baustoffindustri showed solid returns over the last few months and may actually be approaching a breakup point.

Lafargeholcim ADR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lafargeholcim Ltd ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Lafargeholcim is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Wienerberger Baustoffindustri and Lafargeholcim

The main advantage of trading using opposite Wienerberger Baustoffindustri and Lafargeholcim positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wienerberger Baustoffindustri 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 Wienerberger Baustoffindustrie 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.