Correlation Between APPLIED MATERIALS and Eagle Materials
Can any of the company-specific risk be diversified away by investing in both APPLIED MATERIALS 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 APPLIED MATERIALS and Eagle Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between APPLIED MATERIALS and Eagle Materials, you can compare the effects of market volatilities on APPLIED MATERIALS 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 APPLIED MATERIALS with a short position of Eagle Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of APPLIED MATERIALS and Eagle Materials.
Diversification Opportunities for APPLIED MATERIALS and Eagle Materials
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between APPLIED and Eagle is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS and Eagle Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Materials and APPLIED MATERIALS 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 APPLIED MATERIALS 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 APPLIED MATERIALS i.e., APPLIED MATERIALS and Eagle Materials go up and down completely randomly.
Pair Corralation between APPLIED MATERIALS and Eagle Materials
Assuming the 90 days trading horizon APPLIED MATERIALS is expected to under-perform the Eagle Materials. In addition to that, APPLIED MATERIALS is 1.24 times more volatile than Eagle Materials. It trades about -0.09 of its total potential returns per unit of risk. Eagle Materials is currently generating about 0.24 per unit of volatility. If you would invest 26,600 in Eagle Materials on August 29, 2024 and sell it today you would earn a total of 3,000 from holding Eagle Materials or generate 11.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
APPLIED MATERIALS vs. Eagle Materials
Performance |
| Timeline |
| APPLIED MATERIALS |
| Eagle Materials |
APPLIED MATERIALS and Eagle Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with APPLIED MATERIALS and Eagle Materials
The main advantage of trading using opposite APPLIED MATERIALS and Eagle Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APPLIED MATERIALS 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.| APPLIED MATERIALS vs. The Hanover Insurance | APPLIED MATERIALS vs. ZINC MEDIA GR | APPLIED MATERIALS vs. PARKEN Sport Entertainment | APPLIED MATERIALS vs. SBI Insurance Group |
| Eagle Materials vs. Daikin IndustriesLtd | Eagle Materials vs. Vulcan Materials | Eagle Materials vs. Anhui Conch Cement | Eagle Materials vs. Superior Plus Corp |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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