Correlation Between Strategic Education and Eagle Materials
Can any of the company-specific risk be diversified away by investing in both Strategic Education 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 Strategic Education and Eagle Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Strategic Education and Eagle Materials, you can compare the effects of market volatilities on Strategic Education 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 Strategic Education with a short position of Eagle Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Education and Eagle Materials.
Diversification Opportunities for Strategic Education and Eagle Materials
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Strategic and Eagle is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Education and Eagle Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Materials and Strategic Education 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 Strategic Education 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 Strategic Education i.e., Strategic Education and Eagle Materials go up and down completely randomly.
Pair Corralation between Strategic Education and Eagle Materials
Assuming the 90 days horizon Strategic Education is expected to generate 1.1 times more return on investment than Eagle Materials. However, Strategic Education is 1.1 times more volatile than Eagle Materials. It trades about 0.07 of its potential returns per unit of risk. Eagle Materials is currently generating about 0.07 per unit of risk. If you would invest 5,757 in Strategic Education on September 12, 2024 and sell it today you would earn a total of 3,443 from holding Strategic Education or generate 59.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Strategic Education vs. Eagle Materials
Performance |
| Timeline |
| Strategic Education |
| Eagle Materials |
Strategic Education and Eagle Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Strategic Education and Eagle Materials
The main advantage of trading using opposite Strategic Education and Eagle Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Education 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.| Strategic Education vs. IDP EDUCATION LTD | Strategic Education vs. Laureate Education | Strategic Education vs. Superior Plus Corp | Strategic Education vs. SIVERS SEMICONDUCTORS AB |
| Eagle Materials vs. Vulcan Materials | Eagle Materials vs. Heidelberg Materials 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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