Correlation Between Compagnie and Eagle Materials
Can any of the company-specific risk be diversified away by investing in both Compagnie and Eagle Materials 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 Compagnie and Eagle Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compagnie de Saint Gobain and Eagle Materials, you can compare the effects of market volatilities on Compagnie and Eagle Materials 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 Compagnie with a short position of Eagle Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compagnie and Eagle Materials.
Diversification Opportunities for Compagnie and Eagle Materials
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Compagnie and Eagle is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie de Saint Gobain and Eagle Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Materials and Compagnie 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 Compagnie de Saint Gobain are associated (or correlated) with Eagle Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Materials has no effect on the direction of Compagnie i.e., Compagnie and Eagle Materials go up and down completely randomly.
Pair Corralation between Compagnie and Eagle Materials
Assuming the 90 days horizon Compagnie is expected to generate 1.43 times less return on investment than Eagle Materials. But when comparing it to its historical volatility, Compagnie de Saint Gobain is 1.43 times less risky than Eagle Materials. It trades about 0.23 of its potential returns per unit of risk. Eagle Materials is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 26,600 in Eagle Materials on August 25, 2024 and sell it today you would earn a total of 2,800 from holding Eagle Materials or generate 10.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compagnie de Saint Gobain vs. Eagle Materials
Performance |
| Timeline |
| Compagnie de Saint |
| Eagle Materials |
Compagnie and Eagle Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compagnie and Eagle Materials
The main advantage of trading using opposite Compagnie and Eagle Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compagnie position performs unexpectedly, Eagle Materials 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 Eagle Materials will offset losses from the drop in Eagle Materials' long position.| Compagnie vs. HeidelbergCement AG | Compagnie vs. Superior Plus Corp | Compagnie vs. NMI Holdings | Compagnie vs. Origin Agritech |
| Eagle Materials vs. Compagnie de Saint Gobain | Eagle Materials vs. HeidelbergCement AG | Eagle Materials vs. Superior Plus Corp | Eagle Materials vs. NMI Holdings |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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