Correlation Between Daito Trust and Eagle Materials

Can any of the company-specific risk be diversified away by investing in both Daito Trust 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 Daito Trust and Eagle Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Daito Trust Construction and Eagle Materials, you can compare the effects of market volatilities on Daito Trust 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 Daito Trust with a short position of Eagle Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daito Trust and Eagle Materials.

Diversification Opportunities for Daito Trust and Eagle Materials

-0.65

Correlation Coefficient

Daito Trust  Eagle Materials

Excellent diversification

The 3 months correlation between Daito and Eagle is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Daito Trust Construction and Eagle Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Materials and Daito Trust 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 Daito Trust Construction 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 Daito Trust i.e., Daito Trust and Eagle Materials go up and down completely randomly.

Pair Corralation between Daito Trust and Eagle Materials

Assuming the 90 days horizon Daito Trust is expected to generate 2.38 times less return on investment than Eagle Materials. But when comparing it to its historical volatility, Daito Trust Construction is 1.42 times less risky than Eagle Materials. It trades about 0.14 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  26,400  in Eagle Materials on September 3, 2024 and sell it today you would earn a total of  2,600  from holding Eagle Materials or generate 9.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Daito Trust Construction  vs.  Eagle Materials

Daito Trust Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daito Trust Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Daito Trust is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Eagle Materials

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Materials are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Eagle Materials reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Daito Trust and Eagle Materials

The main advantage of trading using opposite Daito Trust and Eagle Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daito Trust 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.

The idea behind Daito Trust Construction 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.

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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.