Correlation Between Monarch Cement and Eagle Materials
Can any of the company-specific risk be diversified away by investing in both Monarch Cement 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 Monarch Cement and Eagle Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Monarch Cement and Eagle Materials, you can compare the effects of market volatilities on Monarch Cement 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 Monarch Cement with a short position of Eagle Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monarch Cement and Eagle Materials.
Diversification Opportunities for Monarch Cement and Eagle Materials
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Monarch and Eagle is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding The Monarch Cement and Eagle Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Materials and Monarch Cement 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 The Monarch Cement 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 Monarch Cement i.e., Monarch Cement and Eagle Materials go up and down completely randomly.
Pair Corralation between Monarch Cement and Eagle Materials
Given the investment horizon of 90 days The Monarch Cement is expected to generate 1.71 times more return on investment than Eagle Materials. However, Monarch Cement is 1.71 times more volatile than Eagle Materials. It trades about 0.22 of its potential returns per unit of risk. Eagle Materials is currently generating about 0.24 per unit of risk. If you would invest 19,225 in The Monarch Cement on August 27, 2024 and sell it today you would earn a total of 2,625 from holding The Monarch Cement or generate 13.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Monarch Cement vs. Eagle Materials
Performance |
| Timeline |
| Monarch Cement |
| Eagle Materials |
Monarch Cement and Eagle Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monarch Cement and Eagle Materials
The main advantage of trading using opposite Monarch Cement and Eagle Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monarch Cement 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.| Monarch Cement vs. Eagle Materials | Monarch Cement vs. Summit Materials | Monarch Cement vs. Cementos Pacasmayo SAA | Monarch Cement vs. Loma Negra Compania |
| Eagle Materials vs. Holcim | Eagle Materials vs. Lafargeholcim Ltd ADR | Eagle Materials vs. The Monarch Cement |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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