Correlation Between Eagle Materials and Star Diamond
Can any of the company-specific risk be diversified away by investing in both Eagle Materials and Star Diamond 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 Star Diamond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eagle Materials and Star Diamond, you can compare the effects of market volatilities on Eagle Materials and Star Diamond 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 Star Diamond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Materials and Star Diamond.
Diversification Opportunities for Eagle Materials and Star Diamond
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Eagle and Star is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials and Star Diamond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Star Diamond 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 Star Diamond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Star Diamond has no effect on the direction of Eagle Materials i.e., Eagle Materials and Star Diamond go up and down completely randomly.
Pair Corralation between Eagle Materials and Star Diamond
Assuming the 90 days horizon Eagle Materials is expected to generate 1.24 times less return on investment than Star Diamond. But when comparing it to its historical volatility, Eagle Materials is 5.22 times less risky than Star Diamond. It trades about 0.09 of its potential returns per unit of risk. Star Diamond is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 4.90 in Star Diamond on September 1, 2024 and sell it today you would lose (3.10) from holding Star Diamond or give up 63.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.74% |
| Values | Daily Returns |
Eagle Materials vs. Star Diamond
Performance |
| Timeline |
| Eagle Materials |
| Star Diamond |
Eagle Materials and Star Diamond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eagle Materials and Star Diamond
The main advantage of trading using opposite Eagle Materials and Star Diamond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eagle Materials position performs unexpectedly, Star Diamond 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 Star Diamond will offset losses from the drop in Star Diamond's long position.| Eagle Materials vs. AUST AGRICULTURAL | Eagle Materials vs. Daito Trust Construction | Eagle Materials vs. Granite Construction | Eagle Materials vs. ePlay Digital |
| Star Diamond vs. PLAYWAY SA ZY 10 | Star Diamond vs. PLAY2CHILL SA ZY | Star Diamond vs. Thai Beverage Public | Star Diamond vs. PLAYTECH |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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