Correlation Between Eagle Materials and CARSALES
Can any of the company-specific risk be diversified away by investing in both Eagle Materials and CARSALES 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 CARSALES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eagle Materials and CARSALESCOM, you can compare the effects of market volatilities on Eagle Materials and CARSALES 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 CARSALES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Materials and CARSALES.
Diversification Opportunities for Eagle Materials and CARSALES
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Eagle and CARSALES is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials and CARSALESCOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARSALESCOM 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 CARSALES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARSALESCOM has no effect on the direction of Eagle Materials i.e., Eagle Materials and CARSALES go up and down completely randomly.
Pair Corralation between Eagle Materials and CARSALES
Assuming the 90 days horizon Eagle Materials is expected to generate 1.22 times more return on investment than CARSALES. However, Eagle Materials is 1.22 times more volatile than CARSALESCOM. It trades about 0.09 of its potential returns per unit of risk. CARSALESCOM is currently generating about 0.1 per unit of risk. If you would invest 12,971 in Eagle Materials on September 3, 2024 and sell it today you would earn a total of 16,029 from holding Eagle Materials or generate 123.58% 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. CARSALESCOM
Performance |
| Timeline |
| Eagle Materials |
| CARSALESCOM |
Eagle Materials and CARSALES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eagle Materials and CARSALES
The main advantage of trading using opposite Eagle Materials and CARSALES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eagle Materials position performs unexpectedly, CARSALES 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 CARSALES will offset losses from the drop in CARSALES's long position.| Eagle Materials vs. Vulcan Materials | Eagle Materials vs. Superior Plus Corp | Eagle Materials vs. NMI Holdings | Eagle Materials vs. Origin Agritech |
| CARSALES vs. COMBA TELECOM SYST | CARSALES vs. SENECA FOODS A | CARSALES vs. Entravision Communications | CARSALES vs. JJ SNACK FOODS |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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