Correlation Between Eagle Materials and Microsoft
Can any of the company-specific risk be diversified away by investing in both Eagle Materials and Microsoft 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 Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eagle Materials and Microsoft, you can compare the effects of market volatilities on Eagle Materials and Microsoft 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 Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Materials and Microsoft.
Diversification Opportunities for Eagle Materials and Microsoft
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eagle and Microsoft is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Eagle Materials i.e., Eagle Materials and Microsoft go up and down completely randomly.
Pair Corralation between Eagle Materials and Microsoft
Assuming the 90 days horizon Eagle Materials is expected to generate 1.59 times more return on investment than Microsoft. However, Eagle Materials is 1.59 times more volatile than Microsoft. It trades about 0.12 of its potential returns per unit of risk. Microsoft is currently generating about 0.06 per unit of risk. If you would invest 15,228 in Eagle Materials on September 1, 2024 and sell it today you would earn a total of 13,572 from holding Eagle Materials or generate 89.13% 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. Microsoft
Performance |
| Timeline |
| Eagle Materials |
| Microsoft |
Eagle Materials and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eagle Materials and Microsoft
The main advantage of trading using opposite Eagle Materials and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eagle Materials position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.| Eagle Materials vs. AUST AGRICULTURAL | Eagle Materials vs. Daito Trust Construction | Eagle Materials vs. Granite Construction | Eagle Materials vs. ePlay Digital |
| Microsoft vs. Pentair plc | Microsoft vs. Norwegian Air Shuttle | Microsoft vs. GEELY AUTOMOBILE | Microsoft vs. DELTA AIR LINES |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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