Correlation Between 3M and EAGLE MATERIALS
Can any of the company-specific risk be diversified away by investing in both 3M 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 3M and EAGLE MATERIALS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and EAGLE MATERIALS, you can compare the effects of market volatilities on 3M 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 3M with a short position of EAGLE MATERIALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and EAGLE MATERIALS.
Diversification Opportunities for 3M and EAGLE MATERIALS
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 3M and EAGLE is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and EAGLE MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EAGLE MATERIALS and 3M 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 3M Company 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 3M i.e., 3M and EAGLE MATERIALS go up and down completely randomly.
Pair Corralation between 3M and EAGLE MATERIALS
Assuming the 90 days horizon 3M is expected to generate 1.01 times less return on investment than EAGLE MATERIALS. In addition to that, 3M is 1.0 times more volatile than EAGLE MATERIALS. It trades about 0.12 of its total potential returns per unit of risk. EAGLE MATERIALS is currently generating about 0.12 per unit of volatility. If you would invest 20,954 in EAGLE MATERIALS on August 29, 2024 and sell it today you would earn a total of 8,046 from holding EAGLE MATERIALS or generate 38.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
3M Company vs. EAGLE MATERIALS
Performance |
| Timeline |
| 3M Company |
| EAGLE MATERIALS |
3M and EAGLE MATERIALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 3M and EAGLE MATERIALS
The main advantage of trading using opposite 3M and EAGLE MATERIALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M 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's long position.The idea behind 3M Company and EAGLE MATERIALS pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| EAGLE MATERIALS vs. Apple Inc | EAGLE MATERIALS vs. Apple Inc | EAGLE MATERIALS vs. Superior Plus Corp | EAGLE MATERIALS vs. SIVERS SEMICONDUCTORS AB |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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