Correlation Between Eagle Materials and QBE Insurance
Can any of the company-specific risk be diversified away by investing in both Eagle Materials and QBE Insurance 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 QBE Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eagle Materials and QBE Insurance Group, you can compare the effects of market volatilities on Eagle Materials and QBE Insurance 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 QBE Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Materials and QBE Insurance.
Diversification Opportunities for Eagle Materials and QBE Insurance
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Eagle and QBE is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials and QBE Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QBE Insurance Group 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 QBE Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QBE Insurance Group has no effect on the direction of Eagle Materials i.e., Eagle Materials and QBE Insurance go up and down completely randomly.
Pair Corralation between Eagle Materials and QBE Insurance
Assuming the 90 days horizon Eagle Materials is expected to generate 1.44 times more return on investment than QBE Insurance. However, Eagle Materials is 1.44 times more volatile than QBE Insurance Group. It trades about 0.12 of its potential returns per unit of risk. QBE Insurance Group is currently generating about 0.07 per unit of risk. If you would invest 21,153 in Eagle Materials on August 29, 2024 and sell it today you would earn a total of 8,447 from holding Eagle Materials or generate 39.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eagle Materials vs. QBE Insurance Group
Performance |
| Timeline |
| Eagle Materials |
| QBE Insurance Group |
Eagle Materials and QBE Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eagle Materials and QBE Insurance
The main advantage of trading using opposite Eagle Materials and QBE Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eagle Materials position performs unexpectedly, QBE Insurance 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 QBE Insurance will offset losses from the drop in QBE Insurance's long position.| Eagle Materials vs. Daikin IndustriesLtd | Eagle Materials vs. Vulcan Materials | Eagle Materials vs. Anhui Conch Cement | Eagle Materials vs. Superior Plus Corp |
| QBE Insurance vs. Darden Restaurants | QBE Insurance vs. AIR PRODCHEMICALS | QBE Insurance vs. Japan Tobacco | QBE Insurance vs. Strategic Education |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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