Correlation Between EAGLE MATERIALS and China Communications
Can any of the company-specific risk be diversified away by investing in both EAGLE MATERIALS and China Communications 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 China Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EAGLE MATERIALS and China Communications Services, you can compare the effects of market volatilities on EAGLE MATERIALS and China Communications 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 China Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of EAGLE MATERIALS and China Communications.
Diversification Opportunities for EAGLE MATERIALS and China Communications
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between EAGLE and China is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding EAGLE MATERIALS and China Communications Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Communications 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 China Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Communications has no effect on the direction of EAGLE MATERIALS i.e., EAGLE MATERIALS and China Communications go up and down completely randomly.
Pair Corralation between EAGLE MATERIALS and China Communications
Assuming the 90 days trading horizon EAGLE MATERIALS is expected to generate 2.88 times less return on investment than China Communications. But when comparing it to its historical volatility, EAGLE MATERIALS is 3.72 times less risky than China Communications. It trades about 0.12 of its potential returns per unit of risk. China Communications Services is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 23.00 in China Communications Services on September 3, 2024 and sell it today you would earn a total of 25.00 from holding China Communications Services or generate 108.7% 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. China Communications Services
Performance |
| Timeline |
| EAGLE MATERIALS |
| China Communications |
EAGLE MATERIALS and China Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EAGLE MATERIALS and China Communications
The main advantage of trading using opposite EAGLE MATERIALS and China Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EAGLE MATERIALS position performs unexpectedly, China Communications 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 China Communications will offset losses from the drop in China Communications' long position.| EAGLE MATERIALS vs. TOTAL GABON | EAGLE MATERIALS vs. Walgreens Boots Alliance | EAGLE MATERIALS vs. Peak Resources Limited |
| China Communications vs. T Mobile | China Communications vs. China Mobile Limited | China Communications vs. ATT Inc | China Communications vs. Nippon Telegraph and |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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