Correlation Between EAGLE MATERIALS and NorAm Drilling
Can any of the company-specific risk be diversified away by investing in both EAGLE MATERIALS and NorAm Drilling 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 NorAm Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EAGLE MATERIALS and NorAm Drilling AS, you can compare the effects of market volatilities on EAGLE MATERIALS and NorAm Drilling 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 NorAm Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of EAGLE MATERIALS and NorAm Drilling.
Diversification Opportunities for EAGLE MATERIALS and NorAm Drilling
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between EAGLE and NorAm is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding EAGLE MATERIALS and NorAm Drilling AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorAm Drilling AS 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 NorAm Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NorAm Drilling AS has no effect on the direction of EAGLE MATERIALS i.e., EAGLE MATERIALS and NorAm Drilling go up and down completely randomly.
Pair Corralation between EAGLE MATERIALS and NorAm Drilling
Assuming the 90 days trading horizon EAGLE MATERIALS is expected to under-perform the NorAm Drilling. But the stock apears to be less risky and, when comparing its historical volatility, EAGLE MATERIALS is 2.4 times less risky than NorAm Drilling. The stock trades about -0.3 of its potential returns per unit of risk. The NorAm Drilling AS is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 269.00 in NorAm Drilling AS on September 12, 2024 and sell it today you would earn a total of 25.00 from holding NorAm Drilling AS or generate 9.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
EAGLE MATERIALS vs. NorAm Drilling AS
Performance |
| Timeline |
| EAGLE MATERIALS |
| NorAm Drilling AS |
EAGLE MATERIALS and NorAm Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EAGLE MATERIALS and NorAm Drilling
The main advantage of trading using opposite EAGLE MATERIALS and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EAGLE MATERIALS position performs unexpectedly, NorAm Drilling 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 NorAm Drilling will offset losses from the drop in NorAm Drilling's long position.| EAGLE MATERIALS vs. Apple Inc | EAGLE MATERIALS vs. Apple Inc | EAGLE MATERIALS vs. Apple Inc | EAGLE MATERIALS vs. Apple Inc |
| NorAm Drilling vs. Apple Inc | NorAm Drilling vs. Apple Inc | NorAm Drilling vs. Apple Inc | NorAm Drilling vs. Apple Inc |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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