Correlation Between Eagle Materials and Australian Agricultural
Can any of the company-specific risk be diversified away by investing in both Eagle Materials and Australian Agricultural 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 Australian Agricultural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eagle Materials and Australian Agricultural, you can compare the effects of market volatilities on Eagle Materials and Australian Agricultural 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 Australian Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Materials and Australian Agricultural.
Diversification Opportunities for Eagle Materials and Australian Agricultural
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Eagle and Australian is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials and Australian Agricultural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Agricultural 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 Australian Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Agricultural has no effect on the direction of Eagle Materials i.e., Eagle Materials and Australian Agricultural go up and down completely randomly.
Pair Corralation between Eagle Materials and Australian Agricultural
Assuming the 90 days horizon Eagle Materials is expected to under-perform the Australian Agricultural. But the stock apears to be less risky and, when comparing its historical volatility, Eagle Materials is 1.41 times less risky than Australian Agricultural. The stock trades about -0.33 of its potential returns per unit of risk. The Australian Agricultural is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 84.00 in Australian Agricultural on September 13, 2024 and sell it today you would lose (1.00) from holding Australian Agricultural or give up 1.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eagle Materials vs. Australian Agricultural
Performance |
| Timeline |
| Eagle Materials |
| Australian Agricultural |
Eagle Materials and Australian Agricultural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eagle Materials and Australian Agricultural
The main advantage of trading using opposite Eagle Materials and Australian Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eagle Materials position performs unexpectedly, Australian Agricultural 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 Australian Agricultural will offset losses from the drop in Australian Agricultural's long position.| Eagle Materials vs. Heidelberg Materials AG | Eagle Materials vs. Superior Plus Corp | Eagle Materials vs. NMI Holdings | Eagle Materials vs. SIVERS SEMICONDUCTORS AB |
| Australian Agricultural vs. Collins Foods Limited | Australian Agricultural vs. Harmony Gold Mining | Australian Agricultural vs. MCEWEN MINING INC | Australian Agricultural vs. Astral Foods Limited |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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