Correlation Between EAGLE MATERIALS and Fanhua
Can any of the company-specific risk be diversified away by investing in both EAGLE MATERIALS and Fanhua 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 EAGLE MATERIALS and Fanhua into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EAGLE MATERIALS and Fanhua Inc, you can compare the effects of market volatilities on EAGLE MATERIALS and Fanhua 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 EAGLE MATERIALS with a short position of Fanhua. Check out your portfolio center. Please also check ongoing floating volatility patterns of EAGLE MATERIALS and Fanhua.
Diversification Opportunities for EAGLE MATERIALS and Fanhua
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between EAGLE and Fanhua is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding EAGLE MATERIALS and Fanhua Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fanhua Inc and EAGLE 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 EAGLE MATERIALS are associated (or correlated) with Fanhua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fanhua Inc has no effect on the direction of EAGLE MATERIALS i.e., EAGLE MATERIALS and Fanhua go up and down completely randomly.
Pair Corralation between EAGLE MATERIALS and Fanhua
Assuming the 90 days trading horizon EAGLE MATERIALS is expected to generate 0.09 times more return on investment than Fanhua. However, EAGLE MATERIALS is 11.37 times less risky than Fanhua. It trades about 0.14 of its potential returns per unit of risk. Fanhua Inc is currently generating about -0.23 per unit of risk. If you would invest 23,800 in EAGLE MATERIALS on November 5, 2024 and sell it today you would earn a total of 1,000.00 from holding EAGLE MATERIALS or generate 4.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
EAGLE MATERIALS vs. Fanhua Inc
Performance |
| Timeline |
| EAGLE MATERIALS |
| Fanhua Inc |
EAGLE MATERIALS and Fanhua Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EAGLE MATERIALS and Fanhua
The main advantage of trading using opposite EAGLE MATERIALS and Fanhua positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EAGLE MATERIALS position performs unexpectedly, Fanhua 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 Fanhua will offset losses from the drop in Fanhua's long position.| EAGLE MATERIALS vs. Apple Inc | EAGLE MATERIALS vs. Apple Inc | EAGLE MATERIALS vs. Apple Inc | EAGLE MATERIALS vs. Apple Inc |
| Fanhua vs. BAKED GAMES SA | Fanhua vs. Gaming and Leisure | Fanhua vs. ANTA SPORTS PRODUCT | Fanhua vs. LG Display Co |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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