Correlation Between Eagle Materials and AECOM TECHNOLOGY
Can any of the company-specific risk be diversified away by investing in both Eagle Materials and AECOM TECHNOLOGY 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 AECOM TECHNOLOGY into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eagle Materials and AECOM TECHNOLOGY, you can compare the effects of market volatilities on Eagle Materials and AECOM TECHNOLOGY 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 AECOM TECHNOLOGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Materials and AECOM TECHNOLOGY.
Diversification Opportunities for Eagle Materials and AECOM TECHNOLOGY
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Eagle and AECOM is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials and AECOM TECHNOLOGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AECOM TECHNOLOGY 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 AECOM TECHNOLOGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AECOM TECHNOLOGY has no effect on the direction of Eagle Materials i.e., Eagle Materials and AECOM TECHNOLOGY go up and down completely randomly.
Pair Corralation between Eagle Materials and AECOM TECHNOLOGY
Assuming the 90 days horizon Eagle Materials is expected to generate 1.02 times less return on investment than AECOM TECHNOLOGY. In addition to that, Eagle Materials is 1.38 times more volatile than AECOM TECHNOLOGY. It trades about 0.12 of its total potential returns per unit of risk. AECOM TECHNOLOGY is currently generating about 0.17 per unit of volatility. If you would invest 7,760 in AECOM TECHNOLOGY on September 3, 2024 and sell it today you would earn a total of 3,240 from holding AECOM TECHNOLOGY or generate 41.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eagle Materials vs. AECOM TECHNOLOGY
Performance |
| Timeline |
| Eagle Materials |
| AECOM TECHNOLOGY |
Eagle Materials and AECOM TECHNOLOGY Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eagle Materials and AECOM TECHNOLOGY
The main advantage of trading using opposite Eagle Materials and AECOM TECHNOLOGY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eagle Materials position performs unexpectedly, AECOM TECHNOLOGY 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 AECOM TECHNOLOGY will offset losses from the drop in AECOM TECHNOLOGY's long position.| Eagle Materials vs. Vulcan Materials | Eagle Materials vs. Superior Plus Corp | Eagle Materials vs. NMI Holdings | Eagle Materials vs. Origin Agritech |
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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