Correlation Between Gamma Communications and Eagle Materials
Can any of the company-specific risk be diversified away by investing in both Gamma Communications and Eagle Materials 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 Gamma Communications and Eagle Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gamma Communications plc and Eagle Materials, you can compare the effects of market volatilities on Gamma Communications and Eagle Materials 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 Gamma Communications with a short position of Eagle Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gamma Communications and Eagle Materials.
Diversification Opportunities for Gamma Communications and Eagle Materials
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Gamma and Eagle is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Gamma Communications plc and Eagle Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Materials and Gamma Communications 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 Gamma Communications plc are associated (or correlated) with Eagle Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Materials has no effect on the direction of Gamma Communications i.e., Gamma Communications and Eagle Materials go up and down completely randomly.
Pair Corralation between Gamma Communications and Eagle Materials
Assuming the 90 days horizon Gamma Communications plc is expected to under-perform the Eagle Materials. But the stock apears to be less risky and, when comparing its historical volatility, Gamma Communications plc is 1.43 times less risky than Eagle Materials. The stock trades about -0.06 of its potential returns per unit of risk. The Eagle Materials is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 26,600 in Eagle Materials on August 27, 2024 and sell it today you would earn a total of 3,200 from holding Eagle Materials or generate 12.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gamma Communications plc vs. Eagle Materials
Performance |
| Timeline |
| Gamma Communications plc |
| Eagle Materials |
Gamma Communications and Eagle Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gamma Communications and Eagle Materials
The main advantage of trading using opposite Gamma Communications and Eagle Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gamma Communications position performs unexpectedly, Eagle Materials 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 Eagle Materials will offset losses from the drop in Eagle Materials' long position.| Gamma Communications vs. T Mobile | Gamma Communications vs. ATT Inc | Gamma Communications vs. Deutsche Telekom AG |
| Eagle Materials vs. HeidelbergCement AG | Eagle Materials vs. Superior Plus Corp | Eagle Materials vs. NMI Holdings | Eagle Materials vs. Origin Agritech |
Check out your portfolio center.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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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