Correlation Between Eagle Materials and Sumitomo Rubber
Can any of the company-specific risk be diversified away by investing in both Eagle Materials and Sumitomo Rubber 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 Sumitomo Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eagle Materials and Sumitomo Rubber Industries, you can compare the effects of market volatilities on Eagle Materials and Sumitomo Rubber 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 Sumitomo Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Materials and Sumitomo Rubber.
Diversification Opportunities for Eagle Materials and Sumitomo Rubber
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eagle and Sumitomo is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials and Sumitomo Rubber Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Rubber Indu 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 Sumitomo Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Rubber Indu has no effect on the direction of Eagle Materials i.e., Eagle Materials and Sumitomo Rubber go up and down completely randomly.
Pair Corralation between Eagle Materials and Sumitomo Rubber
Assuming the 90 days horizon Eagle Materials is expected to generate 1.02 times less return on investment than Sumitomo Rubber. But when comparing it to its historical volatility, Eagle Materials is 1.04 times less risky than Sumitomo Rubber. It trades about 0.25 of its potential returns per unit of risk. Sumitomo Rubber Industries is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 910.00 in Sumitomo Rubber Industries on September 1, 2024 and sell it today you would earn a total of 100.00 from holding Sumitomo Rubber Industries or generate 10.99% 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. Sumitomo Rubber Industries
Performance |
| Timeline |
| Eagle Materials |
| Sumitomo Rubber Indu |
Eagle Materials and Sumitomo Rubber Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eagle Materials and Sumitomo Rubber
The main advantage of trading using opposite Eagle Materials and Sumitomo Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eagle Materials position performs unexpectedly, Sumitomo Rubber 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 Sumitomo Rubber will offset losses from the drop in Sumitomo Rubber's long position.| Eagle Materials vs. AUST AGRICULTURAL | Eagle Materials vs. Daito Trust Construction | Eagle Materials vs. Granite Construction | Eagle Materials vs. ePlay Digital |
| Sumitomo Rubber vs. SEKISUI CHEMICAL | Sumitomo Rubber vs. Sanyo Chemical Industries | Sumitomo Rubber vs. WESTLAKE CHEMICAL | Sumitomo Rubber vs. Lendlease Group |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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