Correlation Between Eagle Materials and Laureate Education
Can any of the company-specific risk be diversified away by investing in both Eagle Materials and Laureate Education 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 Laureate Education into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eagle Materials and Laureate Education, you can compare the effects of market volatilities on Eagle Materials and Laureate Education 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 Laureate Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Materials and Laureate Education.
Diversification Opportunities for Eagle Materials and Laureate Education
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eagle and Laureate is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials and Laureate Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laureate Education 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 Laureate Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laureate Education has no effect on the direction of Eagle Materials i.e., Eagle Materials and Laureate Education go up and down completely randomly.
Pair Corralation between Eagle Materials and Laureate Education
Assuming the 90 days horizon Eagle Materials is expected to generate 2.56 times less return on investment than Laureate Education. But when comparing it to its historical volatility, Eagle Materials is 1.66 times less risky than Laureate Education. It trades about 0.26 of its potential returns per unit of risk. Laureate Education is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest 1,400 in Laureate Education on August 29, 2024 and sell it today you would earn a total of 470.00 from holding Laureate Education or generate 33.57% 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. Laureate Education
Performance |
| Timeline |
| Eagle Materials |
| Laureate Education |
Eagle Materials and Laureate Education Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eagle Materials and Laureate Education
The main advantage of trading using opposite Eagle Materials and Laureate Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eagle Materials position performs unexpectedly, Laureate Education 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 Laureate Education will offset losses from the drop in Laureate Education's long position.| Eagle Materials vs. Superior Plus Corp | Eagle Materials vs. NMI Holdings | Eagle Materials vs. Origin Agritech | Eagle Materials vs. SIVERS SEMICONDUCTORS AB |
| Laureate Education vs. Tower Semiconductor | Laureate Education vs. MTI WIRELESS EDGE | Laureate Education vs. Nordic Semiconductor ASA | Laureate Education vs. ON SEMICONDUCTOR |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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