Correlation Between China National and Eagle Materials
Can any of the company-specific risk be diversified away by investing in both China National 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 China National and Eagle Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China National Building and Eagle Materials, you can compare the effects of market volatilities on China National 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 China National with a short position of Eagle Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of China National and Eagle Materials.
Diversification Opportunities for China National and Eagle Materials
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and Eagle is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding China National Building and Eagle Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Materials and China National 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 China National Building 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 China National i.e., China National and Eagle Materials go up and down completely randomly.
Pair Corralation between China National and Eagle Materials
Assuming the 90 days horizon China National Building is expected to under-perform the Eagle Materials. In addition to that, China National is 2.13 times more volatile than Eagle Materials. It trades about -0.02 of its total potential returns per unit of risk. Eagle Materials is currently generating about 0.08 per unit of volatility. If you would invest 13,892 in Eagle Materials on November 19, 2024 and sell it today you would earn a total of 11,350 from holding Eagle Materials or generate 81.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 77.62% |
| Values | Daily Returns |
China National Building vs. Eagle Materials
Performance |
| Timeline |
| China National Building |
| Eagle Materials |
China National and Eagle Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China National and Eagle Materials
The main advantage of trading using opposite China National and Eagle Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China National 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.| China National vs. Anhui Conch Cement | China National vs. Buzzi Unicem SpA | China National vs. Wienerberger Baustoffindustrie | China National vs. Lafargeholcim Ltd ADR |
| Eagle Materials vs. Vulcan Materials | Eagle Materials vs. CRH PLC ADR | Eagle Materials vs. Summit Materials | Eagle Materials vs. Cemex SAB de |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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