Correlation Between Eagle Materials and China National
Can any of the company-specific risk be diversified away by investing in both Eagle Materials and China National 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 China National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eagle Materials and China National Building, you can compare the effects of market volatilities on Eagle Materials and China National 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 China National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Materials and China National.
Diversification Opportunities for Eagle Materials and China National
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eagle and China is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials and China National Building in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China National Building 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 China National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China National Building has no effect on the direction of Eagle Materials i.e., Eagle Materials and China National go up and down completely randomly.
Pair Corralation between Eagle Materials and China National
Considering the 90-day investment horizon Eagle Materials is expected to generate 0.89 times more return on investment than China National. However, Eagle Materials is 1.13 times less risky than China National. It trades about 0.21 of its potential returns per unit of risk. China National Building is currently generating about -0.09 per unit of risk. If you would invest 28,292 in Eagle Materials on August 30, 2024 and sell it today you would earn a total of 2,301 from holding Eagle Materials or generate 8.13% 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. China National Building
Performance |
| Timeline |
| Eagle Materials |
| China National Building |
Eagle Materials and China National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eagle Materials and China National
The main advantage of trading using opposite Eagle Materials and China National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eagle Materials position performs unexpectedly, China National 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 China National will offset losses from the drop in China National's long position.| Eagle Materials vs. Vulcan Materials | Eagle Materials vs. CRH PLC ADR | Eagle Materials vs. Summit Materials | Eagle Materials vs. Cemex SAB de |
| China National vs. Anhui Conch Cement | China National vs. Buzzi Unicem SpA | China National vs. Wienerberger Baustoffindustrie | China National vs. Lafargeholcim Ltd ADR |
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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