Correlation Between Eagle Materials and Gamma Communications
Can any of the company-specific risk be diversified away by investing in both Eagle Materials and Gamma 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 Gamma 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 Gamma Communications plc, you can compare the effects of market volatilities on Eagle Materials and Gamma 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 Gamma Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Materials and Gamma Communications.
Diversification Opportunities for Eagle Materials and Gamma Communications
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Eagle and Gamma is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials and Gamma Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gamma Communications plc 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 Gamma Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gamma Communications plc has no effect on the direction of Eagle Materials i.e., Eagle Materials and Gamma Communications go up and down completely randomly.
Pair Corralation between Eagle Materials and Gamma Communications
Assuming the 90 days horizon Eagle Materials is expected to generate 1.38 times more return on investment than Gamma Communications. However, Eagle Materials is 1.38 times more volatile than Gamma Communications plc. It trades about 0.21 of its potential returns per unit of risk. Gamma Communications plc is currently generating about 0.01 per unit of risk. If you would invest 26,400 in Eagle Materials on August 31, 2024 and sell it today you would earn a total of 2,400 from holding Eagle Materials or generate 9.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eagle Materials vs. Gamma Communications plc
Performance |
| Timeline |
| Eagle Materials |
| Gamma Communications plc |
Eagle Materials and Gamma Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eagle Materials and Gamma Communications
The main advantage of trading using opposite Eagle Materials and Gamma Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eagle Materials position performs unexpectedly, Gamma 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 Gamma Communications will offset losses from the drop in Gamma Communications' long position.| Eagle Materials vs. Vulcan Materials | Eagle Materials vs. Superior Plus Corp | Eagle Materials vs. NMI Holdings | Eagle Materials vs. Origin Agritech |
| Gamma Communications vs. Performance Food Group | Gamma Communications vs. Waste Management | Gamma Communications vs. CeoTronics AG | Gamma Communications vs. Cleanaway Waste Management |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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